Video instructions and help with filling out and completing Fill Form 2220 Taxable

Instructions and Help about Fill Form 2220 Taxable

Hi I'm Jennifer with tax TV here with some information about S corporation distributions to its shareholders s corpse are set up to pass all income and losses through to its shareholders who are taxed on their share of that income whether or not amounts are actually distributed in other words when a distribution is actually made we need to know more to determine whether the amount is taxable when distributions by an S corp are made with no earning and profits the amounts are tax-free to the extent of the shareholders adjusted basis in the stock because this amount is considered a return of the shareholders investment if the distributions exceed the shareholders adjusted basis then the excess is treated as gained from the sale or exchange of the stock and is normally taxed at capital gain rates the shareholders basis in the stock is then reduced by the amount of any distribution that is not included in income if the S corp has earnings and profits the tax implications are a bit more complicated because the taxation depends on the accumulated adjustments account in general this is a running total of the undistributed earnings that have been taxed to the shareholders since the corporation made its S corp election any distributions made to the extent of the accumulated adjustments account are treated similarly to distributions by an S corp without earnings and profits first as a tax-free return of investment then as gained from the sale or exchange of stock any distribution in excess of the accumulated adjustments account is first treated as a dividend to the extent it doesn't exceed the S corporations earnings and profits and then as they gain from the sale or exchange of stock the distributions can be made either in cash or property it is important to note that if property is distributed the amount will be in the fair market value of that property on the date of distribution with the shareholder taking a basis in the property equal to that fair market value if the distributed property has increased in value the corporation is subject to taxed based on the extent of such appreciation as a result s Korps are not the preferred entities for owning property for more information about the taxation of s corpse search tax you