ETax847 Posted October 15, 2014 Report Share Posted October 15, 2014 Client has a k1 from his scorp that shows $13k in box 1 for his share of Ordinary Business Income, however, he was only paid $5k. Is there a reasonable explanation for the discrepancy? Quote Link to comment Share on other sites More sharing options...
jklcpa Posted October 15, 2014 Report Share Posted October 15, 2014 Client has a k1 from his scorp that shows $13k in box 1 for his share of Ordinary Business Income, however, he was only paid $5k. Is there a reasonable explanation for the discrepancy? Shareholder is taxed on his proportional share of the company's ordinary income and other flow through items. If the $5K was salary, then the shareholder will report the $5K as W-2 income on line 7 of the form 1040 plus the $13K of ordinary income on Sch E. If that is the case, the $5K in salary was a deduction on the 1120S to arrive at the remaining $13K of ordinary income. If the $5K was a shareholder distribution, then he/she will report only the $13K. Like a partnership, the shareholder reports the income from that entity whether or not he/she received any money or property as distributions at all. Quote Link to comment Share on other sites More sharing options...
ETax847 Posted October 15, 2014 Author Report Share Posted October 15, 2014 I believe to be the latter. So if $5k was distributed then his basis would go up by $8k? Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted October 16, 2014 Report Share Posted October 16, 2014 Cash flow? Profits used to repay debts or buy assets? The 5 sounds like about the amount to pay taxes on the 13. Quote Link to comment Share on other sites More sharing options...
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