Q
how are dispersments from an 1120s taxed
I'm a seasoned industrial engineer with a keen interest in machine learning. Here to share insights on latest industry trends.
Disbursements from an S corporation (filing Form 1120S) are generally not taxed at the corporate level due to the "pass-through" taxation feature. Instead, shareholders report their share of the corporation's income, deductions, losses, and credits on their individual income tax returns. The distribution of cash or property to a shareholder is typically tax-free, as long as the disbursement does not exceed the shareholder’s stock basis. However, if the distribution exceeds a shareholder's stock basis, it is taxed as a capital gain. It's important for shareholders to maintain accurate records of their stock basis to determine the tax implications of distributions correctly. Planning and consultation with a tax professional are advisable to navigate these rules.
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