Proportionate liquidating distribution Sex chat texting service

When Tom finds himself in hard times financially, he wants to have TJ Engineering make distributions to help him get by.Jeff, on the other hand, doesn’t need the cash and would rather leave the money available to the business to help finance construction of a new office building.

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each shareholder owns 50% of the stock of the S Corporation).

TJ Engineering has been profitable for a number of years and has approximately $1,000,000 of retained earnings that can be distributed.

Well, the simple answer is no, but there are possibilities for “timing differences” between distributions.

First, let’s explain why disproportionate distributions would be disallowed.

In a private letter ruling (PLR) issued back in May of 1995, an S Corporation had a “misunderstanding of the regulations” regarding S Corporations and had made disproportionate distributions to some shareholders over others.

The S Corporation intended “…to make a distribution to its shareholders to equalize the cumulative amount of per share distributions, including interest, to correct for the distributions made…” during 1995.The disproportionate distributions were made during tax years 1987 through 1991.The S Corporation then made proportional distributions beginning in 1992.In 1994, the S Corporation made equalizing distributions to compensate for the distributions made during the years 1987 through 1991.Again, the IRS ruled here that because the corporation had only one class of stock with equal rights to distributions, in the end the distributions made had not adversely impacted the S status of the corporation.The overall lesson to be learned through all this is fairly simple: disproportionate distributions should be avoided, but having them for a time will not necessarily result in termination of the S Corporation’s election, so long as they’re not .

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