Rcc liquidating corp 2016
Thus, when you make distributions up to the amount of undistributed previously taxed income, they distributions are not taxed any further.
This rule applies whether or not the S corporation has E&P from C corporation tax years.
S corporation shareholders are taxed on income whether or not the earnings are distributed.
To summarize, the existence of C Corporation E&P simply means that distributions from the corporation in excess of undistributed previously taxed income (AAA) will be considered an ordinary dividend to the extent of C Corporation E&P.
Distributions in excess of accumulated E&P are treated as a nontaxable return of capital to the extent of the shareholder’s stock basis.
Distributions beyond that are treated as a sale of the shareholder’s stock, generally taxed as a long-term capital gain, depending on the holding period.
Tax implications of a C Corporation converting to an S Corporation There are basically two tax options for a corporation.
A regular corporation (or C corporation) pays tax on its earnings at the corporate level.
Theoretically, E&P represents the corporation’s ability to pay dividends.