Level 5

S-Corp Related Party Transaction

Forum|Forum|2 years ago
March 8, 2024
1 reply
9 views

An individual is the common 100% shareholder of two S-Corps, both in the e-commerce industry. S-Corp A pays for all advertisement bills and receives reimbursement from S-Corp B. S-Corp A writes off 100% bill payments and recognizes income when receiving S-Corp B's allocated expenses.

When we prepare the two Form 1120S, are we required to disclose related party transactions or the existence of the controlled group and the members within? If so, how can we report this?

Thank you!

S

strongsilence

Level 10

Schedule B, Question 4a

There might be other questions on that page too.

T

TaxesTechAuthor

Level 5

Thank you for the guidance! The Schedule B question is worded as:

"4. At the end of the tax year, did the corporation:

a. Own directly 20% or more, or own, directly or indirectly, 50% or more of the total stock issued and outstanding of any foreign or domestic corporation? For rules of constructive ownership, see instructions. If "Yes," complete (i)through (v) below"

The S-Corp A and S-Corp B are sister companies that do not own each other's shares. Can the attribution rule apply here, that they own 100% of each other indirectly through the individual shareholder? I guess I am shaky on these concepts....thank you!!

sjrcpa

Level 15

Yes the attribution rules apply to compute the indirect ownership %.

This has nothing to do with who are permitted owners of S Corps, unless you actually have a nonpermitted owner, in which case you are no longer an S Corp..

The more I know the more I don’t know.

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