If you did a stock purchase, the installment payment would be at personal level. So you will make the payment from your personal account. Interest included in this payment will be considered investment interest expense. You can reduce the interest expense from the income that flows from the S Corp to your personal tax return. $16,000 paid from the corporate account will be reported as distribution to you or if you do not have enough basis that you can show it as a loan from the corporation to some extent.
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
I purchased the corp for $100,000 so this would be my basis, correct? If I wanted to treat the $16,000 as a distribution, where exactly do I report this? Do distributions affect your basis?
$100K is the cost of the stock. What about the retained earnings in the business and capital in the business?
Yes, $16K distribution will reduce your basis. But note that the gain will increase your basis in the corp too.
How do I report a distribution?
It will be reported on Lin 16-Sch K-1 and on Sch M-2