Q: Is there a difference between distributions at Line 16D on Schedule K in Form 1120S vs distributions at Line 19A on Schedule K in Form 1065? Do they represent different types of distributions?
A: Distributions at Line 16 D are simply identified as "Distributions" in the IRS guidelines while distributions at Line 19A are identified as "Cash and Marketable Securities".
16D distributions could be property distributions but, in the vast majority of cases, since the income tax obligation is passed from the company to the owners, they are generally cash distributions to owners for the payment of income taxes – and additional compensation – on taxable company revenue.
19A distributions serve the same purpose. That is, they provide cash to partners or members for payment of the income tax obligations on taxable partnership income, which is passed to the partners or members. However, unless the partners or members receive guaranteed payments, distributions are the sole source of compensation for partners or members. Many partnerships and LLCs do not provide guaranteed payments, which means that 19A distributions pay income taxes and provide the partners their sole source of compensation, in effect. Even if partnerships and LLCs provide guaranteed payments, partners and members generally receive additional compensation in the form of 19A distributions that exceed the income tax obligations.
Q: On either Slide 47 or 48, why does the $127,741 show positive if it is a loss?
A: The $127,741 reported at Line 32 on Schedule /Part II is the total income (passive and non-passive) from the Partnership and the S Corporation and not a loss. The Schedule E/Part I passive losses were used to offset the passive income of $35,774 from Information Access Partners such that taxable income reported at Line 17 on Schedule 1 was $91,967 or $127,541 less $35,774.
Course overview: Understanding Schedules K-1