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Our company is setup as an S Corporation that was once a C Corporation with earnings and profits. We would like to distribute dividends to shareholders from the C Corporation AEP since tax rates are still low. Can we distribute this to all shareholders based on their pro-rata share in the company and do we just issue a 1099-DIV form after the end of 2012?
ANSWER
Expert Neda Tafreshi's Answer:
You can distribute dividends to the original shareholders of the corporation while the entity was a C-corp and issue a 1099-DIV to them. The S-corp members would not be entitled to dividends if they were not a shareholder when the company was a C-corp.
