1120-US: Determining the deemed dividend amount for each shareholder used in the deemed dividend election statement (FAQ)

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Question

How does UltraTax CS determine the amount of deemed dividend for each shareholder used in the deemed dividend election statement?

Answer

The S Corporation is considered to make a deemed dividend on the last day of the corporation's taxable year. Therefore, UltraTax CS apportions the deemed dividend entered in the Deemed dividend elected under Regulation 1.1368-1(f)(3) field in Screen Ms to each shareholder based on their end-of-year ownership percentage and displays the amount on the deemed dividend election statement. If a shareholder terminated their stock ownership during the year and does not own stock in the S Corporation at the end of the year, they will not be included in the deemed dividend election statement.

If you want to allocate the deemed dividend to the shareholders using a different method than what is calculated by UltraTax CS, enter the desired amount in the Deemed dividend (Force) field in the View > Shareholder Information > Other Info tab. UltraTax CS displays the amount entered in the deemed dividend election statement for the respective shareholder and the shareholder's basis worksheet as an other stock increase. The sum of the amounts entered for all shareholders must equal the amount entered in the Deemed dividend elected under Regulation 1.1368-1(f)(3) field in Screen Ms.

You will also need to enter the amount of deemed dividend allocated to the shareholders in the Deemed dividend (Force) field in the View > Shareholder Information > Other Info tab if the shareholder does not have any beginning-of-year shares entered in the Shareholder tab. The sum of the amounts entered for all shareholders must equal the amount entered in the Deemed dividend elected under Regulation 1.1368-1(f)(3) field in Screen Ms.

Related topic: 1120-US: S Corporation distributions and section 1368 distribution elections FAQs

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