Another item that could cause an entity taxed as an S corporation to lose the election is disparate distributions. Like most things, this is simple in theory but more complicated in application. The theory is that the shareholders of an S corporation are entitled only to the proportion of corporation distributions based on their percentage ownership of the stock. In other words, if you are a shareholder of an S corporation, you are entitled to the same proportion of distributions as you own shares (if you own 1/3 of the shares, you are entitled to 1/3 of the distributions). Read more
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