Distributing S Corp Profits

[yuw541]

I have an S Corp which has undistributed profits from 2003.
I now need to distribute these profits as part of the
dissolution of my corporation. I am the sole shareholder,
and for the sake of discussion, the profits total $18,000
and my basis in the corporation is $10,000.

Question: Do I file a single 1099-DIV and mark all $18,000
as "non-taxable" despite the fact that $8000 will be
taxable?

 

[Paul A Thomas]

I have an S Corp which has undistributed profits from 2003.
I now need to distribute these profits as part of the
dissolution of my corporation. I am the sole shareholder,
and for the sake of discussion, the profits total $18,000
and my basis in the corporation is $10,000.

Question: Do I file a single 1099-DIV and mark all $18,000
as "non-taxable" despite the fact that $8000 will be
taxable?

The "S" corporate profits should have already been reported
on Schedule K-1. There is no need to report them again on a
1099DIV.

 

[Katie]

Your S corporation cannot pay a dividend, liquidating or
otherwise, unless it has earnings and profits remaining from
a time when it was a Subchapter C corporation.

Assuming the corporation was always an S, you should have
paid individual income tax on all of the S corporation's
income as it was earned. If the distribution includes
appreciated property, the corporation will recognize gain in
2005 to the extent of the excess of the fair market value of
the property over its adjusted basis in the hands of the
corporation. That gain will be included in your Schedule
K-1 and taxed to you in 2005. The distribution itself
should have no tax consequence to you.

Katie in San Diego

 

[Harlan Lunsford]

I have an S Corp which has undistributed profits from 2003.
I now need to distribute these profits as part of the
dissolution of my corporation. I am the sole shareholder,
and for the sake of discussion, the profits total $18,000
and my basis in the corporation is $10,000.

Question: Do I file a single 1099-DIV and mark all $18,000
as "non-taxable" despite the fact that $8000 will be
taxable?

1099=DIV's are not issued in respect to stockholders of an S
corporation. For 2003, you should have paid income tax on
your profits as shown on that year's shcedule K-1. Same
applies for tax year 2004.

Did you do that?

ChEAr$,
Harlan Lunsford, EA n LA

 

[David Woods, EA, ChFC, CLU]

I have an S Corp which has undistributed profits from 2003.
I now need to distribute these profits as part of the
dissolution of my corporation. I am the sole shareholder,
and for the sake of discussion, the profits total $18,000
and my basis in the corporation is $10,000.

Question: Do I file a single 1099-DIV and mark all $18,000
as "non-taxable" despite the fact that $8000 will be
taxable?

S-corp profit distributions do not get get reported on
1099s.

 

[yuw541]

Thank you to everyone for your help. Your responses are all
very much appreciated.

In answer to Harlan's question, I did pay taxes on these
profits in the appropriate tax years. The corporation filed
1120S forms showing the profits and I included the amounts
shown on Schedule K-1 on my 1040.

I am very happy to hear that no additional reporting is
required when distributing these previously taxed profits. I
guess all the material I read about 1099-DIV reportings and
their impact to basis is associated with a C (not S) corp.
That was the source of my confusion.