Abstract This paper analyzes the rules governing cash distributions of S Corporations after the Subchapter S Revision Act of 1982 (SSRA). Special emphasis is given to S Corporations which had elected under Subchapter S between 1958 through 1982 and S Corporations which have accumulated earnings and profits. These corporations may now be faced with multiple sets of operating rules for distributing the various layers of capital. New law governs the distributions from the Accumulated Adjustments Account and from Accumulated Earnings and Profits, whereas old law governs distributions of Previously Taxed Income. Certain elections are permitted under both laws. The authors point out the gaps and inconsistencies in the SSRA and alert the readers to new pitfalls and planning opportunities. Legislative and regulatory solutions are suggested.
Jamison et al. (Sat,) studied this question.