"Lola" <cmalk[at]aboutdominion.com> wrote:

- quote -

Dividends paid out of E&P are reported to recipients on
1099-DIV, not on the K-1. Ordering rules for distributions
require them to come first out of AAA and then E&P.
However, an election to take distributions out of E&P before
AAA is available & can be made on an annual basis. See Reg
Sec 1.1368-1(f). It may be advisable to make this election
as a means of reducing or eliminating E&P. To my knowledge,
distributions from E&P are the only S-Corp distributions
that are treated as taxable dividends.

Don Rosenberg, EA

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"Lola" <cmalk[at]aboutdominion.com> wrote:

- quote -

S corps that used to be C corps that pay dividends from
prior C corp retained earnings must issue 1099-DIVs for the
dividends paid. Dividends ARE DIFFERENT than distributions.

NOTE - Be careful with this! There are ordering rules that
govern how to account for which is paid when. You really
should see a tax professional to make sure you are ordering
them properly.

Gene E. Utterback, EA

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If a C corp becomes an S corp and the C corp has retained
earnings at that point, does it need to file anything
special to pay dividends out of those prior retained
earnings (after it becomes an S corp). IS this the only way
an S corp pays "dividends" as opposed to "distributions"?
Thanks

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