S corp liquidating distribution. Discussion:S-Corporation Liquidation Dividend.



S corp liquidating distribution

S corp liquidating distribution

OldJack talk edits said: Truth is the S-corp is not "required to report" it anywhere but the seller is required to report it on his personal tax return as a sale of stock. You simply fail to understand that K1 distributions are only from AAA accounts that do not belong to any shareholder.

You need some CPE. K1 reporting has no bearing on whether or not the S has a 2nd class of stock. The 2nd class of stock rules are statutory. From an accounting standpoint for the corporation how are you going to debit a distribution account when you are required to record the transaction as Treasury Stock? Show us your accounting entry for the corp books that would result in a charge to a distribution account rather than Treasury Stock account.

I agree this is much ado about nothing other than your misunderstanding of S-Corp accounting and tax prep, thereby misleading other forum posters. Thanks for the editing discussion link. I should have said "Wow.. Ckenefick talk edits said: Here we have a negative AAA from operations.

AAA doesn't get reduced by the distribution. Under your logic, it wouldn't go on the guy's K1 because it is not out of the AAA account. And you would be wrong. These is just a simple example that illustrate reporting disparities between the AAA and the K1. So if we add another one to the list - the redemption - I really don't see a problem with it.

Unequal distributions on the K1 will normally cause a second class of stock that will terminate the S-corp election. Actual unequal non-liquidating or liquidating distributions will create a 2nd class of stock. We don't have either of those here. We have a redemption distribution. Debit Treasury Stock, credit Cash. Then, go to the guy's K1 and over-ride the distribution amount.

But again, I typically do either or. That is, I either treat as Treasury stock and note the redemption on the K1, along with a reference to B OR I run it through as a Distribution, yet still also note it on the K1. In either case, no over-rides necessary. No second class of stock. Debit distributions and credit cash.

And I can only anticipate your next question Quit making stuff up. If you have a cite, provide it. A B is for a broker transaction. Their argument is simple: We think we need to report it, but since we're a corporation, and not a broker, we feel MISC, "Other Income" is the proper mechanism. It's sound logic to a certain extent. Anyway, this is an area where's there's no real guidance, if you want to go the route, go ahead. I myself wouldn't do it for an S-corp. S-corp reporting goes on Schedule K1.

JR1 talk edits said: March 19, The real problem is that the corp is not required to report the transaction and that's what's bugging you Jack.

You want to force some reporting, which is why you end up making up some way to do it. But since the corp doesn't have to, make up any old way you want and it doesn't matter.

Me, I don't report. If I don't, I'll make an entry for info on the K-1 so their guy knows. No JR1 I am not bugged about reporting it although in many cases the buy out is under extreme conditions with the shareholders and they want it reported.

I am bugged about reporting it as a distribution on a S-K1 when there is no requirement and it is wrong to report it there. It is a corp transaction that does not fall into the separately stated items transactions that are to be reported as "distributions" on a k1. I agree with you that it could be reported as other information on the K1, but that is actually not what that space is intended for.

Chris is correct in his example of k1 reporting of a distribution that was in excess of the AAA account. However, his example did not show a distribution that created an unequal distributions among multiple shareholders. Such a distribution in his example would be in accordance with the separately stated items transaction and in many cases would exceed the shareholders tax basis resulting in treating as a partial sale of stock gain to report on Sch-D.

Chris shows the correct requirement entry for treasury stock and then override the program to make it a distribution! I guess he thinks he can, and should, just override anything he wants too! As to providing Chris cites, I don't have time to do research for his benefit. Go talk with the editors of PPC if you have a problem with reporting as a Distribution. Again, you'll get the same result for an S that's always been an S.

As I have said umpteen times, reporting it on a K1 doesn't mean a 2nd stock of class is created. Perhaps you should review the rules as to when a 2nd class of stock is created. Last time I checked, how it gets reported on a K1 isn't one of them Everyone here would most likely disagree with you. But let me guess OldJack will come up with some other reason why this isn't his argument.

If there are no rules, then why is it wrong? I don't do it that way. It was your question, so I answered it. It doesn't matter much. They're both equity accounts. AAA gets adjusted in a special way on a redemption anyway. Ditto for Distribution reporting treatment - the AAA will be adjusted in a special way, most like in an amount not equal to the redemption distribution. I will admit when I am wrong as I learn something new everyday and have for more than 40 years. We're simply proposing that, of the options available, the one you have chosen isn't the best one.

Therefore, by footnoting it on the K1, nothing will be lost in the translation. It wouldn't be for my benefit, I already know how to handle it. It would be for your benefit In all other cases, including my first example, you'll have a mis-match. There's mis-matches all over the place on the S with redemptions, mis-matches that occur by operation of law. For some reason, you're uncomfortable with the "Distribution" mis-match

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Tax Implications of Distributions from S-Corporations Webcast



S corp liquidating distribution

OldJack talk edits said: Truth is the S-corp is not "required to report" it anywhere but the seller is required to report it on his personal tax return as a sale of stock. You simply fail to understand that K1 distributions are only from AAA accounts that do not belong to any shareholder.

You need some CPE. K1 reporting has no bearing on whether or not the S has a 2nd class of stock. The 2nd class of stock rules are statutory. From an accounting standpoint for the corporation how are you going to debit a distribution account when you are required to record the transaction as Treasury Stock? Show us your accounting entry for the corp books that would result in a charge to a distribution account rather than Treasury Stock account.

I agree this is much ado about nothing other than your misunderstanding of S-Corp accounting and tax prep, thereby misleading other forum posters.

Thanks for the editing discussion link. I should have said "Wow.. Ckenefick talk edits said: Here we have a negative AAA from operations.

AAA doesn't get reduced by the distribution. Under your logic, it wouldn't go on the guy's K1 because it is not out of the AAA account. And you would be wrong. These is just a simple example that illustrate reporting disparities between the AAA and the K1. So if we add another one to the list - the redemption - I really don't see a problem with it. Unequal distributions on the K1 will normally cause a second class of stock that will terminate the S-corp election. Actual unequal non-liquidating or liquidating distributions will create a 2nd class of stock.

We don't have either of those here. We have a redemption distribution. Debit Treasury Stock, credit Cash. Then, go to the guy's K1 and over-ride the distribution amount. But again, I typically do either or. That is, I either treat as Treasury stock and note the redemption on the K1, along with a reference to B OR I run it through as a Distribution, yet still also note it on the K1. In either case, no over-rides necessary.

No second class of stock. Debit distributions and credit cash. And I can only anticipate your next question Quit making stuff up. If you have a cite, provide it. A B is for a broker transaction. Their argument is simple: We think we need to report it, but since we're a corporation, and not a broker, we feel MISC, "Other Income" is the proper mechanism. It's sound logic to a certain extent.

Anyway, this is an area where's there's no real guidance, if you want to go the route, go ahead. I myself wouldn't do it for an S-corp. S-corp reporting goes on Schedule K1. JR1 talk edits said: March 19, The real problem is that the corp is not required to report the transaction and that's what's bugging you Jack. You want to force some reporting, which is why you end up making up some way to do it.

But since the corp doesn't have to, make up any old way you want and it doesn't matter. Me, I don't report. If I don't, I'll make an entry for info on the K-1 so their guy knows. No JR1 I am not bugged about reporting it although in many cases the buy out is under extreme conditions with the shareholders and they want it reported.

I am bugged about reporting it as a distribution on a S-K1 when there is no requirement and it is wrong to report it there. It is a corp transaction that does not fall into the separately stated items transactions that are to be reported as "distributions" on a k1. I agree with you that it could be reported as other information on the K1, but that is actually not what that space is intended for. Chris is correct in his example of k1 reporting of a distribution that was in excess of the AAA account.

However, his example did not show a distribution that created an unequal distributions among multiple shareholders. Such a distribution in his example would be in accordance with the separately stated items transaction and in many cases would exceed the shareholders tax basis resulting in treating as a partial sale of stock gain to report on Sch-D.

Chris shows the correct requirement entry for treasury stock and then override the program to make it a distribution! I guess he thinks he can, and should, just override anything he wants too! As to providing Chris cites, I don't have time to do research for his benefit. Go talk with the editors of PPC if you have a problem with reporting as a Distribution. Again, you'll get the same result for an S that's always been an S. As I have said umpteen times, reporting it on a K1 doesn't mean a 2nd stock of class is created.

Perhaps you should review the rules as to when a 2nd class of stock is created. Last time I checked, how it gets reported on a K1 isn't one of them Everyone here would most likely disagree with you. But let me guess OldJack will come up with some other reason why this isn't his argument. If there are no rules, then why is it wrong? I don't do it that way. It was your question, so I answered it. It doesn't matter much.

They're both equity accounts. AAA gets adjusted in a special way on a redemption anyway. Ditto for Distribution reporting treatment - the AAA will be adjusted in a special way, most like in an amount not equal to the redemption distribution.

I will admit when I am wrong as I learn something new everyday and have for more than 40 years. We're simply proposing that, of the options available, the one you have chosen isn't the best one. Therefore, by footnoting it on the K1, nothing will be lost in the translation. It wouldn't be for my benefit, I already know how to handle it.

It would be for your benefit In all other cases, including my first example, you'll have a mis-match. There's mis-matches all over the place on the S with redemptions, mis-matches that occur by operation of law. For some reason, you're uncomfortable with the "Distribution" mis-match

S corp liquidating distribution

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. s corp liquidating distribution

4 Comments

  1. S-corp reporting goes on Schedule K1. They're both equity accounts. Thanks for the editing discussion link.

  2. For S corporations, two separate rules deal with the distribution of installment obligations in liquidation. Such a request will shorten the statute of limitations from three years to 18 months.

  3. I agree with you that it could be reported as other information on the K1, but that is actually not what that space is intended for. Further, he asserted that, following S-Corp. You want to force some reporting, which is why you end up making up some way to do it.

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