Vijay Sharma wrote:

- quote -

Distributions from an S corporation are not dividends, and
are not reported on 1099R. The only exception occurs when
the S corporation was previously a C corporation, and still
has earnings and profits from its C years. In that case,
any distribution of those earnings is a taxable dividend.
However, that income was not taxed at the stockholder level
at the time it was earned by the corporation.

An S that has always been an S does not pay dividends.

- quote -

"Ordinary dividends" on Line 5a is dividend income RECEIVED
BY the S corporation, which keeps its character when passed
through to the stockholders. This comes into play when the
S corporation has invested in the stock of other
corporations and receives dividend income. "Dividends from
accumulated E & P" on Line refers to dividends PAID BY the S
corporation from earnings and profits accumulated when it
was a Subchapter C corporation. If the corporation has
always been an S, there would never be an entry on this
line.

- quote -

S corporations are subject to certain taxes at the corporate
level. If an S corporation was previously a C corporation
that had assets that had appreciated at the time of the S
election, and disposes of such assets within a statutory
period (10 years as I recall), the difference between the
fair market value of the assets at the time of the S
election and the corporation's adjusted basis of the assets
is "built-in" gain, which is taxable at the corporate level
as if it had been received by a Subchapter C corporation.
Also, there is a corporate-level tax on excess net passive
income of certain S corporations.

As you can see, S corporations are not simple. An S
corporation is not a do-it-yourself project. Your questions
suggest that you need to consult a knowledgeable tax
professional ASAP to be sure you have not made significant
mistakes and to prevent such mistakes in the future. There
are many pitfalls and they can be expensive.

Katie in San Diego

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"Vijay Sharma" <SharmaV[at]Sutterhealth.org> wrote:

- quote -

S corps do not issue 1099 Div for payments from previously
taxed income or accumulated adjustments. Only payments from
E & P if the company was, at any time, a C corp.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Vijay Sharma" <SharmaV[at]Sutterhealth.org> wrote

- quote -

Any "dividends" paid from an "S" corporation are not taxed
again - as dividends. The better term to use is
"Distribution of Profits" because that's what they are.
Distributions of profits from an "S" corporation are not
deductible by the corporation, nor are they taxed to the
individual shareholder. The shareholder is taxed on his or
her share of the profits regardless of whether or not any of
those profits are distributed.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

For S Corp (Form 1120S), ordinary income (net income on
books) goes over to Schedule E of each shareholder and then
to Form 1040 line 17 and taxed.

1099- DIV are issued for dividends or distribution paid out
of Retained Earnings (ordinary income of prior years already
taxed in prior years) which are also taxed to the
shareholder on Form 1040 line 9a.

Isn't this double taxation like in a C Corp?

Or did I not follow this through correctly?

On Schedule K of 1120S, what are the differences between
"ordinary dividends" on line 5a and "dividends from
accumulated E & P" on line 17c? When would "ordinary
dividends" come into play?

Also, what types of taxes do lines 22 through 27 "Taxes and
Payments" of Form 1120S refer to - not Income Taxes,
correct? Because Income Taxes of S Corp are paid through
shareholders' Form 1040, correct?

Thanks in advance for your help.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >