Reporting s corp sharholder distributions in divorce year

Forum|Forum|1 year ago
February 19, 2025
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If one spouse is 100% owner of an s corp in the year of divorce 2024 and distributions are to be split 50/50 as per the divorce, how would you report half of the k-1 income on the other spouses tax return. Since no K-1 is issued in their SS#, do you have to put it all on your tax return and then issue some kind of 1099?

Not A Product Question

Mike9241

it would seem that if 1 person owns 100% before and after the divorce, they report 100% of the income. the fact that 50% of the distributions are going to the ex, would be like a property settlement neither taxable to the recipient nor deductible by the stockholder.

now if the divorce involved transferring part of the ownership from one spouse to the other, the income is prorated, there are two methods. the cutoff method where the books would be close on the day before the divorce became final and the sole share holder at that time would get 100% of the income. for the rest of the year the income would be split based on the relative ownership percentages

the other way is based on the weighted average of ownership

ex getting shares owns 50% starting 7/1/2024 184/366*.5*net profit or loss for the year 25.1366%

other spouse 100% * 182/366 +50% *184/366 74.8634%

however, disproportionate distributions may cause tax issues.

distribution are disproportionate if they vary from the ownership % on the date the distribution pertains to.