Question 1 of 15.

Joelle is a shareholder in Vault Storage, Inc., an S corporation. Vault Storage had capital gains during the tax year. How are the capital gains reported on Form 1120-S taxed?

Capital gains from an S corporation are generally not taxable because they are treated like qualified dividends.

Joelle's portion of the capital gain will be reported to her on a Schedule K-1 (Form 1120-S) and she will pay the tax with her Form 1040.

Vault Storage will report and pay the tax when submitting their Form 1120-S for the tax year.

When submitting their Schedule K-1 to the IRS as part of the tax return, each shareholder will pay their taxes owed.