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As you might know S-corporations don't pay income tax. Instead - all taxable income and tax liability are passed to shareholders.S-corporations are so- called "pass-through" entities. That means - taxable income is calculated on S-corporation income tax return - form 1120S - reports gross income and deduct expenses - and after that - it is passed to shareholders and reported on K1 statements. Each shareholder will be responsible for his/her share of S-corporation income.
So - each shareholder will use that information when preparing his/her individual tax return.
Income passed from S-corporation is added to other taxable income and the shareholder will be taxed based on TOTAL income, filing status, deductions, etc.
The character of income will be the same. Thus if S-corporation realizes rental income - it will be passed to shareholders as rental income. If however S-corporation realizes capital gain or capital loss - correspondingly - capital gain or capital loss will be passed to shareholders.