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How do I allocate distributions to only 1 K-1?

NoelC
Level 1

Hello,

This is on the S-corp tax return, which only has 2 K-1.  The cash distribution was only to one owner, how do I show 100% of distribution on his K-1?  I don't see an allocation page on this.

Thanks!

 

 

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8 Comments 8
IRonMaN
Level 15

Distributions are supposed to be according to ownership percentages.  Doing otherwise kills your sub S election.


Slava Ukraini!
NoelC
Level 1

Got it!  Thanks!

IRonMaN
Level 15

You betcha!


Slava Ukraini!
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PhoebeRoberts
Level 11
Level 11

The Distributions screen requires you to make entries by shareholder, unlike in the 1065 package.

There's been a recent court ruling that says disproportionate distributions, when not allowed by the operating agreement, doesn't bust your S-election. It's been in the last 3 weeks, and the fact pattern was that the guy who didn't get cash didn't want to pick up his share of the income, and argued that the S-election had been busted and you don't get pass-through income from a C-corp. Tax Court disagreed!

qbteachmt
Level 15

Thanks, @PhoebeRoberts . Is there guidance for how to handle that difference, eg Owed to Shareholder that didn't get a distribution or Owed By Shareholder for the difference distributed?

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PhoebeRoberts
Level 11
Level 11

Either of those works. I think "Due to Guy Who Didn't Get Paid" is maybe technically more correct, but it probably depends on state law.

sjrcpa
Level 15

@PhoebeRoberts  I found that case odd because the reason the one guy didn't get paid is because the other shareholders [allegedly?] embezzled the funds they took.

The more I know, the more I don't know.
PhoebeRoberts
Level 11
Level 11

Yeah, that was definitely a bad facts case. If the Tax Court had ruled in the shareholder's favor, the statute would have already run on the corporate return, though, and "no one ever pays tax on that enormous chunk of money" is never going to be the ruling if there's an argument that gets it taxed. But the logic was that the taxpayer was entitled, under state law / the corporate organizing documents, to get an equal distribution.