Tax-exempt interest earned by an S corporation is not reported to its shareholders because it is excluded from the shareholders' gross income.

Question

Quizplus · Accepted Answer

Tax-exempt interest earned by an S corporation is reported to its shareholders on Schedule K-1 and must be included on their individual tax returns, even though it is not taxable. This information is necessary for various tax calculations, including the alternative minimum tax.

Tax-Exempt Interest Earned by an S Corporation Is Not Reported