Discussion:Distribution to new shareholder (SCorP)
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Discussion Forum Index --> Consumer Questions --> Distribution to new shareholder (SCorP)
| 23 October 2009 | |
| On 1/1/09 I buy 100% of an existing S-corp, for $20,000. The existing AAA is a positive $5000.
During year 2009 the S-Corp has revenue of $50,000 and expenses of $50,000 .... thus, 2009 taxable income is $-0-. On 12/31/09, the S-corp distributes $5,000 to me. So my tax basis goes from $20,000 down to $15,000. Does the corp's AAA go from $5,000 down to $-0- ? For some reason I have been thinking that since the $5,000 of AAA was produced by taxable income of the prior S-corp owner, then I am not allowed a tax free distribution of that $5,000. | |
| 23 October 2009 | |
| The AAA is an entity-level account, not associated with any one sh. So you can distribute it to yourself. I'm surprised the previous owner left it for you, since he paid the tax on it. But that is how you purchased. AAA is now clean as a whistle. | |
| 23 October 2009 | |
| Agree with EasternPA. The purchaser of the stock steps into the shoes of the prior shareholder for AAA purposes. | |
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