1120S

[ILLMAS]

I don't even know where to start, client was adviced by bankruptcy attorney to remove himself as a shareholder from a company he co-owns with his brothers. I met with them last year and they had told me that as of 2009 he won't be getting paid nor recieve any distributions, well now that I see the accounting for company, I see the shareholder that was not suppposed to be paid payroll and paid distributions receive a couple of distributions from Jan to Apr. Here is my question/concern, does the shareholder that was not supposed get anything from the business get a K1? If so, if he was only there up to April, how would I calculate his share for those 4 months?

Thanks

MAS

[Margaret CPA in OH]

How did the client dispose of his ownership interest? Did he sell to other owners or back to the corporation? The corporation has the option of closing the books as of the change in ownership or simply allocating in the program the percentage ownership during the year. So long as he was a shareholder, he should receive the allocable share of profit or loss (given basis)on a K-1 for that period of ownership. I don't immediately see why or how he was not on the payroll as an owner, assuming that this is a corporation (shareholder is your term). If this was a partnership, that another matter. More information would be helpful.