What are the tax ramifications (irs only) of distribution


Shareholders Albert and Baker each own 50 percent of the stock in an corporation. As of January 1, 2011, each shareholder had a basis in his stock of $50,000, and on that date the S corporation had accumulated earnings and profit of $-0-. The corporation's financial income statement for the calendar year 2011, is as follows:

S corporation Income Statement
For the year ended December 31, 2011

Gross Sales $500,000
Cost of goods Sold 400,000

Gross Profit $100,000

Other Income:
Interest on tax-exempt bonds $10,000
Dividends 2,000
Interest (bank accounts) 3,000
Long-term capital gain 50,000
Short-term capital loss ( 10,000) 55,000
Total Income (including nontaxable) $155,000

Expenses:
Salary(paid to Albert) $25,000
Business expenses 30,000
Charitable contributions 5,000
Interest (carrying inventory) 4,000 64,000

Net income $91,000

During the year corporation distributes $50,000 to each shareholder.
What are the tax ramifications (IRS only) of the distribution made by the S corporation to Albert during 2011?

 

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Accounting Basics: What are the tax ramifications (irs only) of distribution
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