Hey, so i am getting ready for the end of year. I have a question regarding an s corp. The s corp had a loss last year that was passed onto the one shareholder. This was able to happen because of a substantial loan from the shareholder that was in the company. The retained earnings this year (2016) are now negative. They were at zero in 2015 prior to the loss. This year the company will have profits. Lets say for simplicity that the company has a current retained earnings of -612,000. If profits this year for the company are 612,000. The retained earnings will end up at zero. Will this 612,000 profit be passed on to the shareholder on k-1 as taxable income? The shareholder used all of the loss last year against his personal taxes. Would the shareholder be taxed on this even if its not actually being distributed but reinvested in retained earnings?
USA S corporation earnings passed through on k-1
- Thread starter Lisa725
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It will flow through to his 1040, regardless if distributions were or were not taken. That is the beauty/demise of the pass-through entity.