Paul Neiffer reminds everyone of a doctrine that can bite one in the tail.....

For those of you who do not know of Paul Neiffer------ he is a tax accountant/CPA with Larson etal in MN........puts out a daily(maybe only periodic) email on tax items related to farming.........definitely worth the free subscription.

His reminder..........when involved in transactions, especially separate entities, where you do not have control............make sure the agreement among the owners requires defined distributions from that entity.

In the case that Neiffer presents-------- the Gibson Limited Family Partnership---------- one of the parties got legally crapped on, due to an inadequate agreement.

S corporations work the same way.

So.......bottom line.........members, partners, shareholders of S corps.......all should have agreements in place that require cash distributions equal to a percentage of the income that drops into their tax returns from the separate entity..............otherwise a person could find themselves in the situation of paying income taxes without getting cash from the entity that is the source of the income.

That could ruin a person's cash flow in a hurry.

(NOTE------ if involved with an S corp, there is a way to thwart these adverse circumstances if there is no agreement------ but it might not be the most palatable solution.)