![]() The K-1 shows the amount of non-dividend distribution the shareholder receives it does not state the taxable amount of a distribution. It is important to understand that the K-1 reflects the S corporation's items of income, loss and deduction that are allocated to the shareholder for the year. The S corporation will issue a shareholder a Schedule K-1. Unlike a C corporation, each year a shareholder's stock and/or debt basis of an S corporation increases or decreases based upon the S corporation's operations. The amount of a shareholder's stock and debt basis in the S corporation is very important. S Corporation Shareholders are Required to Compute Both Stock and Debt Basis The fact that a shareholder receives a K-1 reflecting a loss does not mean that the shareholder is automatically entitled to claim the loss. There are four shareholder loss limitations:Įach limitation is addressed in the order shown above and must be met before a shareholder is allowed to claim a pass-through loss.
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