S Corp: Distributions to Shareholders

Question 1

What is AAA?

Answer 1

AAA is an Scorp concept and is all of the accumulated earnings that haven’t been paid out.

When they do get paid out (a distribution) it is nontaxable.

Question 2

When a C Corp becomes an S Corp, what are tax implications for distributions?

Answer 2

Distributions will come out of AAA first (nontaxable), then they will come out of any AEP remaining from the C Corp years (taxable)