What to include in income figure

[confusedinfl]

When I completed my chapter 7 paperwork I used my W-2 salary income as the income in prior years. For this year I did not take any salary from my company but I did take some owner draw. This is what I included for this year income to date.

There is an adversary proceeding in this case and I think they are trying to claim I understated my income because I did not include the flow through profit from my s-corporation. This profit stayed in the company and just flows through to my individual tax return for tax purposes, it is not income received as far as I am concerned. I would think that "received" would be the operative word.

Also, I dissolved a company in 2005 and there was a sizeable shareholder loan that was reclassed to an owner draw and which also will then flow through to my 1040 for tax purposes. The draw was actually taken in 2003 and 2004 but will be reported on an amended 2005 or 2006 return as business profit. Again, should this be reported as income received even though there was no actual cash received in 2006 (filed on July 31, 2006)?

Surely in bankruptcy they are concerned with actual cash flow and any income that is not related to cash flow should not be considered.

Does anyone have any clear idea as to what the definition of income received is with regard to s-corporations, owner draw and business profit?

Also, how would you report a one-time premature hardship distribution from an IRA?

[lrprn]

Have you filed yet? If you haven't, then you need the immediate help of an experienced bankruptcy lawyer in your area. Any time business and personal finances are mixed, the bankruptcy is looked at very closely. You don't want to be going down this path without expert legal counsel.

If you already filed pro se (without a lawyer), then we have several members here who filed owning S corporations - hopefully they can provide some guidance about how their median incomes were calculated by their lawyers.

A "one-time premature hardship distribution from an IRA" withdrawn during the six months prior to filing counts as income.

It would help us help you more if you could give us a little more information such as which state you are filing in?

[confusedinfl]

Response

I filed in Florida last July and I do have an attorney but for whatever reason the retirement hardship distribution was not reported anywhere on the schedules.

[DivorceRuinedMe]

I filed in Florida last July and I do have an attorney but for whatever reason the retirement hardship distribution was not reported anywhere on the schedules.

Wouldn't it have showed up in your income schedule? A cash-out is consdiered income in the month it was received. Was it a cash-out or a loan? If it was a loan then it wouldn't have shown up in your income calculations.

[confusedinfl]

Response

I took the net of the owner draw account and reported that as YTD income. The reason I took the net is that I made business purchases using personal accounts and also drew out cash on a couple of occasions therefore the net of the account seemed the correct figure to report.

With regard to the shareholder loan it was reported as a loan at the time of filing bankruptcy. Since disolving the company the outstanding balance will have to be reclassed as a distribution. The cash was taken out of the company as a loan between 2001 and 2004.

[SinkingFast]

The distribution from the retirement IRA should have been included in your 6 month CMI if you receive the monies less than 180 days prior to filing. Early withdrawal of retirement monies is considered regular income.

The business issues,.............. I dunno.