Contact UsCan An S-Corp Pay Dividends Other Than When It Used To Be A C-Corp And Had Employee Assistance Program (EAP) Or If A Shareholder Goes Negative On Basis?
Can an S-Corp pay dividends other than when it used to be a C-corp and had Employee Assistance Program (EAP) or if a shareholder goes negative on basis? I say no, and why would you. The dividend paid is not deductible against S-Corp earnings, which will become ordinary income anyway.
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Tax Professional Answers
John Stancil
Technically, an S Corporation does not pay dividends. An S corporation owner pays tax on his share of the profits regardless of any distributions. What is often referred to as a dividend for an S Corp is simply a tax-free distribution to the owner. If the corporation has a loss, the owner may not deduct any loss that results in him having a negative basis.
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309 weeks ago