Have a Tax Question? Ask a Tax Expert
I'm Lindie, and I’m a moderator for this topic. I sent your requested professional a message to follow up with you here, when they are back online.
If I can help further, please let me know. Thank you for your continued patience.
The subject matter is not 5%. The subject matter has always been 95%.
Historically Shareholders never had any personal use in the Corporation. This only happened one time 4 years ago with supplies.
You stated an option was to reclass the shareholders supply distribution to Shareholders Receivable. You are now stating this is a problem.
The point the shareholders have been making is they received nothing….the company used the supplies because of a one-time error. The shareholders paid more taxes as a result. Shareholders believe they should not be taxed again as though they received something; because they did not. Their only validations for their positions are the facts presented to you.
Shareholders have reviewed your answers this morning and it appears your conclusions are:
Shareholders are back to the Original Question. Even though the Shareholders have received no supplies, the IRS requires the Shareholders to receive the supplies as Shareholders Distribution and paid Capital Gain Tax. It appears there are no M-1 adjustments, book entries, tax accounting procedures, or valid acceptable argument to remedy this.
The Shareholders have concluded this morning based upon all your answers; they will accept the Shareholders Supply Distribution (Even though Shareholders received no supplies) and paid a 2nd Capital Gains Tax.
Do you agree with the Shareholders Conclusions?
Thank You as Always,
The Shareholders had left the profits in the Corporation for many years. This created lots of equity in the Corporation and high positive Shareholder’s Basis. Shareholders finally elected to take Cash Distributions recently, and discovered the supplies problem. So yes…there was lots of basis and high equity to absorb supplies very easily….
What do you think???.
Interesting…I will discuss these options with the other shareholders this evening
Are these statements correct?
Shareholders Appreciate all your help.....
I apologize for the delay. My wife has chemo tonight, and my son had Boy Scouts, and I have been running around like a crazy person!
Your statements are correct. They also arrive at the logical conclusion - by being conservative, the shareholders pay more tax. That is logical! By being aggressive one minimizes tax.
It has been a pleasure working with you! I enjoy a mental exercise. IT is also refreshing to find ethical corporations! We constantly hear about how people try to get away with things. Clients always ask me how far they can go before the IRS suspects anything, or what can they deduct without raising any questions, or what can they get away with. It is not often that I find people such as yourselves! You are to be congratulated!
I hope your wife is feeling well.
Basis Question for an Individual….
An individual X owns Investment Residential Rental Property and this property appreciated in value over the years.
When X sells the Property for a profit, Capital Gains are reported.
Instead of selling the property X takes Cash-Out Loan on the equity of the Investment Property. Does X report Capital gains when the cash out is greater than the basis of the property or is Capital Gain reported only when the property is sold?
It is Friday and hopefully you will be able to relax and Enjoy the Weekend/Moment…..