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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Must all money left in an S corp on 12/31 be distributed as

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Must all money left in an S corp on 12/31 be distributed as income to the shareholders? If not, what types of expenditures may that money be used for in the next calendar year, without suffering a tax penalty?
Hi Russell and welcome:

The is no requirement that prior year income be distributed to shareholders. However, most S corporations will distribute enough to cover tax liabilities on that income. Any amounts that are not distributed are added to your basis.
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