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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I have an S-Corp with 3 owners where one of the owners died

Customer Question

I have an S-Corp with 3 owners where one of the owners died in September '08. When generating the 1120S K-1, I'm supposed to allocate the income between the owner and his estate based on the percentage of the year that each owned the stock. However when filling out Line 16D of the 1120S K-1, if a distribution was made to each of the shareholders before the owner died, does this get allocated proportionally as well or do I show the entire distribution to the owner?
Submitted: 8 years ago.
Category: Tax
Expert:  RD replied 8 years ago.

Distribution will be based on the amount actually paid to the deceased stockholder. And yes, the distribution has to be proportional in a S Corp. So the distribution before death and after death(to the estate) has to be proportional for each stockholder.



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.

Customer: replied 8 years ago.

Thank you, XXXXX XXXXX'm not sure if I understand your answer yet. The Distributions (about 15K apiece) made in August were to each owner based on the percentage of ownership (33.33%). However, since one owner died in September, most of the lines on the K1 of the dead owner and the of the estate get divided proportionally to each other based on the date of death - regardless of how much income was made before and after the death. Does Line 16D get treated differently and show actulas? If so, why?