Scorp dividend payout

[Questionguy101]

Scorp started in 2009. There was a loss of $3,000 in that year.

Scorp made a profit in 2010. The amount of profit is $10,000.

Should the dividend payout to the shareholder in 2010 be $10,000 or $7,000?

[ChEAr$]

Scorp started in 2009. There was a loss of $3,000 in that year.

Scorp made a profit in 2010. The amount of profit is $10,000.

Should the dividend payout to the shareholder in 2010 be $10,000 or $7,000?

what? There is no "dividend payout". no such animal for an S corp.



whatever the tax loss for 2009 is (probably about 3,000 , more or less) is reported on the K1; likewise the tax profit for 2010.

[dsi]

QG, if you are asking if the SH should take a "distribution", then the answer would be "if he wants to then take a distribution". However, I would advise that the amount of his distribution does not create a negative basis.

[Questionguy101]

QG, if you are asking if the SH should take a "distribution", then the answer would be "if he wants to then take a distribution". However, I would advise that the amount of his distribution does not create a negative basis.

Yes, I mean distribution, sorry.

So the shareholder can choose to take either $7,000 or $10,000 distribution, or whatever amount he wants, as long as it does not create a negative basis. Is it correct?

[JohnH]

He can take as much as he wants as long as there is cash in the bank. But if he exceeds basis, he has to pay tax on the excess as capital gain.

[Gary2]

I wouldn't phrase it that the shareholder can choose to take whatever amount he wants.

Rather, the board of directors can choose to authorize a distribution (or conceivably a loan to a shareholder). It may be a small distinction, but for S-Corps, it's important, even if there's just one shareholder. If there's more than one, then it's much more important.