For S corporations with earnings and profits from prior C corporation years, the taxation of distributions to the shareholder is very similar to the rules for partnerships.

Question

Quizplus · Accepted Answer

The taxation of distributions from S corporations with earnings and profits from prior C corporation years is different from partnerships. S corporation distributions are first applied against the accumulated adjustments account (AAA), then to earnings and profits, and finally to the shareholder's stock basis, whereas partnership distributions are generally based on the partner's basis in the partnership.

For S Corporations with Earnings and Profits from Prior C