Discussion:Dividend 1099-div or K-1 line 5
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Discussion Forum Index --> Tax Questions --> Dividend 1099-div or K-1 line 5
| 31 January 2007 | |
| Hello,
If an LLC acting as a corporation, distributes dividends to the members, do those members need a 1099? I understand that this income should be entered on their K-1 on line 5 instead? Also, since this LLC is a domestic corporation, this is a qualified dividend, correct? Thanks! | |
| 31 January 2007 | |
| If the LLC is taxed as a C corp, then issue the 1099-DIV. If the LLC is taxed as an S corp, then the distributions are reflected on the K-1. Have to know how the LLC is taxed. | |
| 31 January 2007 | |
| o-k, they are being taxed as a C corp. So I will do a 1099-DIV.
So, now, the question is, are the LLC's dividends qualified? I think they are. Thanks! | |
| 31 January 2007 | |
| yes, since the LLC already paid tax on the profit (taxed as a corp) | |
Michaelstar (talk|edits) said: | 31 January 2007 |
| MsTwizz - you'll need to read what are "qualified dividends" in the 1099-DIV instructions to make a final determination. Your post has not provided enough info to answer that question.
Here is the link: http://www.irs.gov/pub/irs-pdf/i1099div.pdf | |
| 4 February 2007 | |
| Thanks, Michalstar! Some bedtime reading after doing tax forms all day! Life is good! | |
| 4 February 2007 | |
| MsTwizz: Just want to make sure noticed JR1's comment. LLCs treated as C corps do not have K-1s for the members. LLC files an 1120.
Regarding the distribution and whether it is a qualified dividend, you first need to know whether the distribution is, in fact, a dividend. First look at whether the entity has current earnings and profits equal to or greater than the current year distribution. If so, then a dividend and then you can look at the "qualified" rules. If not, then look at cumulative E&P. If the E&P is less than the current year distributions, then the distribution is a non-taxable distribution to the extent of basis. Once basis is exhausted it is a capital gain. ST or LT is dependent upon the respective members holding periods. If you do a search for E&P in TaxAlmanac, there was a preious thread with the code citations. | |
