Can an S Corp pay dividends other than when it used to be a C corp and had 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. Help. In a dispute with a guy
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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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383 weeks ago