Finance

Have finance questions? Ask a financial expert online.

Ask an Expert,
Get an Answer ASAP!

RD: May I request your contact number so that we can discuss…

Customer Question
Hello RD:May I request your...
Hello RD:May I request your contact number so that we can discuss one on one.I have an IT company (S corp) and planning to sale 100% stocks.
Should I distribute my retained earning to shareholders before actual sale occurs?Vipin
Submitted: 7 months ago.Category: Finance
Show More
Show Less
Ask Your Own Finance Question
Answered in 10 hours by:
11/26/2017
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 14,622
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. My name's Lane

...

LANE - I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice 1986.

If you’ll please bear with me for a minute I’ll type up my initial response, and then we can go from there if you have further questions on this

Ask Your Own Finance Question
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

NO. As a passthrough, (because that profit flowed through the K-1 to the schedule E to line 17 of your tax return) you have already been taxed on those dollars and should pull/distribute before sale.

...

This will not be a taxable event.

...

It WILL, however, decrease your basis in the S-Corp stock.

Ask Your Own Finance Question
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

S-Corp shareholders track their basis (a yearly calculation) for two reasons; (1) knowing basis available to take losses, and (2) to be able, eventually, to calculate capital gain on sale, if a stock sale is done.

...

Capital contribution and profit raise basis, losses and distributions decrease basis.

...

If a purchase is made and retained earnings are left in the company, this should be added TO the purchase price.

...

The convention is not to include cash (which again, would already have been taxed) in the sale.

Ask Your Own Finance Question
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit" – That’s the only way I’ll be credited for the work.

I hope you’ll rate me based on my accuracy and thoroughness (as opposed to any good news/bad news content). Thank you!

...

But again, if you need more on this, please let me know.

Lane

Ask Your Own Finance Question
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

Hello - Did you see my answer? Id be glad to make thr offer for a phone consult. This comes at an additional charge. Let me know.

...

Lane

Ask Your Own Finance Question
Customer reply replied 7 months ago
I am confused from your first response. Are you telling us to distribute or not?FYI, I keep my books on accrual basis and file tax return on cash basis. Thus, retained earning on K-1 are different than what I see on my accrual balance sheet.
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

I'm telling you that you SHOULD if you want the money. Most do. You've already paid tax on it.

...

VERY rarely would someone sell an S-Corp with the cash accounts in tact. You'd certainly want to add that to the purchase price ... and THEN you'd be increasing your gain on sale with money that's already been taxed.

...

(effecively taxing yourself twice)

Ask Your Own Finance Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a financial professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 14,622
14,622 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Rakhi Vasavada

Rakhi Vasavada

Financial and Legal Consultant

2,609 satisfied customers

Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

Megan C

Megan C

Certified Public Accountant (CPA)

2,222 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Manal Elkhoshkhany

Manal Elkhoshkhany

Tutor

1,933 satisfied customers

More than 5000 online tutoring sessions.

JKCPA

JKCPA

CPA

844 satisfied customers

Bachelors degree and CPA with Accounting experience.

Eric

Eric

Financial Manager

559 satisfied customers

Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.

R. Klein, EA

R. Klein, EA

Accountant

480 satisfied customers

TurboTax Expert. QuickBooks Certified Pro Advisor

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

332 satisfied customers

NASD Licensed Rep, 1997-2001, Business Attorney

< Previous | Next >

Related Finance Questions
A sole owner of the C Corporation is making payments to
A sole owner of the C Corporation is making payments to himself as Distributions and posted against the Retained Earnings of the company.It is my understanding that those payments should be classified… read more
Lane
Lane
JD, CFP, MBA, CRPS
14,622 satisfied customers
What is the journal entry to post the S Corp buyout of
what is the journal entry to post the S Corp buyout of shareholders … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
My husband and I were the sole stockholders (50% each) of
My husband and I were the sole stockholders (50% each) of our C Corporation. He passed away the first month into our corporate tax year. I am the sole beneficiary of his will. His will went to probate… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Need advice on issue with Shareholder Distributions in an S
Need advice on issue with Shareholder Distributions in an S Corp … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,325 satisfied customers
When recording a distribution on 1120S do I subtract it from
When recording a distribution on 1120S do I subtract it from Paid in Capital or do I increase negative retained earnings. We need to do this over the phone as quickly as possible. Its easier than it l… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
AAA S corp doesn't show on balance sheet? : have an s corp
have an s corp with losses in year 1 and 2. retained earnings is -38,000 first year. I should reduce stock holder equity basis on balance sheet for first year by 38,000 … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
It is not about tax issue. It is about presenting the balance
It is not about tax issue. It is about presenting the balance sheet. Three shareholders purchased an S "Corporation for 1.5 million on a stock sale. … read more
Lane
Lane
JD, CFP, MBA, CRPS
14,622 satisfied customers
I have a question regarding the use of term outside debt
Hello, I have a question regarding the use of long term outside debt basis to offset tax on S-Corp shareholder income. Currently have long term stock basis of approximately $500,000 (from partner shar… read more
Jonathan Tierney
Jonathan Tierney
MBA
295 satisfied customers
Working with a new client. On s balance sheet under Equity
Working with a new client. On his balance sheet under Equity he has Capital Stock, Distribution of Capital, Retained Earnings and Net Income. He doesn't know the history or have records far enough bac… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
C-Corp distribution's: When a C-Corp (or an LLC with a
C-Corp distribution's: When a C-Corp (or an LLC with a C-Corp tax election) issues distributions to Shareholder/Members can the distributions be indiscriminate? For example, can a distribution be made… read more
USTaxAdvising
USTaxAdvising
Partner
Bachelor's Degree
609 satisfied customers
I'm trying to balance a schedule L. Company is a single member
I'm trying to balance a schedule L. Company is a single member LLC formerly on a schedule C now being taxed as a corporation. They don't believe in debt so they pay everything off when they buy it. Th… read more
Lane
Lane
JD, CFP, MBA, CRPS
14,622 satisfied customers
Lane: I have a question about Washington Mutual, and you
Lane: I have a question about Washington Mutual, and you seem to be the resident expert here. So here goes... Washington Mutual, Inc. ("WMI") was the bank holding company. It filed for BK protection. … read more
Lane
Lane
JD, CFP, MBA, CRPS
14,622 satisfied customers
Dear Ms Stephen G, We are a potential IPO company. The
Dear Ms Stephen G, We are a potential IPO company. The company want to acquire the S company in CA. The S company should be converted to C company as its Subsidiary. The transaction will arise high va… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
my s corporation company has 2 50/50 shareholders with 100
my s corporation company has 2 50/50 shareholders with 100 shares each. the company bought all 100 shares of one of the partners for 110,000. would that be recorded as a debit to treasury stock of 110… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Taxpayer is an S corp (Corp A) reporting their income on the
Taxpayer is an S corp (Corp A) reporting their income on the cash basis. The S corp is owned 100% by one individual. The business was discontinued at the end of 2013. Corp A's balance sheet at the end… read more
taxmanrog
taxmanrog
Master\u0027s Degree
989 satisfied customers
Question for rgb02a, Accountant . Need help to calculate the
Attachment: 2012-10-19_073721_1-1-11.pdf Attachment: 2012-10-19_073744_1-1-12.pdf Attachment: 2012-10-19_073809_8-31-12.pdf Attachment: 2012-10-19_073826_12-31-10.pdf Attachment: 2012-10-19_073841_12-… read more
rgb02a
rgb02a
Chief Financial Officer
Bachelor's Degree
22 satisfied customers
A Question for Charles Greiner, Certified Public Accountant
A Question for Charles Greiner, Certified Public Accountant (CPA). Here is the scenario. A business was an LLC- sole but we decided to covert to an LLC - S Corp for 2011 retroactively.. His business h… read more
rgb02a
rgb02a
Chief Financial Officer
Bachelor's Degree
22 satisfied customers
s corp. shareholder buyout. financed by sba/bank loan. the
s corp. shareholder buyout. financed by sba/bank loan. the selling shareholder receives 190,000 at closing. what account is used for the debit? loan is to the corp. stock is sold to the remaining shar… read more
RD
RD
Self Employed
Master's Degree
1,164 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x