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Shareholder

Specially allocate items to shareholders

You can't specially allocate income and deduction items to shareholders within an 1120-S client. Special allocations only apply to Partnerships (1065 clients). The only item you can allocate differently than the shareholder's prorata ownership percentage is property distributions. To allocate property distributions, select
View / Shareholder Information
, then the
Other Info
 tab.
  • Per IRC section 1377(a)(1), items of income, gain, loss, deduction, or credit are allocated to the shareholder on a per-share, per-day basis. You can't specially allocate S Corporation items to shareholders.
  • Per IRC section 1377(a)(2), if any shareholder terminates their entire interest in the S Corporation, the S Corporation, with the consent of all affected shareholders, can elect to apply the rules providing for pro rata shares as if the tax year consisted of 2 tax years.
  • The S Corporation can also elect to treat the year as if it consisted of separate taxable years in the case of a qualifying disposition under IRC Regulation 1.1368-1(g)(2).
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