Distributing S-Corp Profit to Shareholder


S

SCorp

I have an S-Corp where I own 100% of the shares.

I am using Turbo Tax business to complete my taxes and I
have a few questions regarding non-deductible expenses and
distributing profit to myself.

1) 50% of my meals/entertainment are not deductible, and
therefore reduce the basis of my stock (from 20K to $19646).
That just means if and when I sell my stock I would pay
capital gains on everything above my new basis, correct?

2) I've finished entering all the info into my return on
TurboTax and have a profit of $1353. Turbo Tax automatically
decides that this is retained earnings. If I were to write
myself a check for this amount (too late for 2004 taxes, but
I could for 2005), where would I put it on my next return?

3) How is the profit distribution affected by the
non-deductible expenses? I tried entering a distribution in
Turbotax just to experiment. It put it on the same line as
the non-deductible with a code D but there was an error
saying things didn't add up (Unfortunately I don't remember
exactly what TurboTax said.)

As always, thank you for your help.
 
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T

Thomas Healy

SCorp said:
I have an S-Corp where I own 100% of the shares.

I am using Turbo Tax business to complete my taxes and I
have a few questions regarding non-deductible expenses and
distributing profit to myself.

1) 50% of my meals/entertainment are not deductible, and
therefore reduce the basis of my stock (from 20K to $19646).
That just means if and when I sell my stock I would pay
capital gains on everything above my new basis, correct?
Correct. If you entered it properly, it should show up on
Schedule M-1.
2) I've finished entering all the info into my return on
TurboTax and have a profit of $1353. Turbo Tax automatically
decides that this is retained earnings. If I were to write
myself a check for this amount (too late for 2004 taxes, but
I could for 2005), where would I put it on my next return?
Schedules K and K-1, and M-2.
3) How is the profit distribution affected by the
non-deductible expenses? I tried entering a distribution in
Turbotax just to experiment. It put it on the same line as
the non-deductible with a code D but there was an error
saying things didn't add up (Unfortunately I don't remember
exactly what TurboTax said.)
It isn't.
 

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