USA Distribution of S Corp retained earnings after change in shareholder percentages

May 14, 2017
Reaction score
United States
I understand that net income has to be reported as taxable income to each shareholder in proportion to their ownership percentage. However, what happens if some of that taxable income is retained and then distributed in the following year by which time ownership percentages have changed? For example, suppose Person A owned 100% of the stock in year 1 when net income was 10K. Person A reported and paid taxes on that 10K, but none of it was distributed in year 1. In year 2, Person A owned 50% and Person B 50%. If the 10K of retained earnings from year 1 are distributed in year 2, can Person A take 100% with the consent of Person B?


Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads