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As another poster pointed out, you are receiving a K-1 from the "S" corp each year. The K-1 has lots a breakdowns including 1) regular income 2) rental income 3) dividends & interest 4) capital gains --- both long & short, etc. etc.

The easiest way I can explain it is that every number on line 1 thru 7 of the K-1 goes somewhere on your personal 1040 & lines 1 to 7 are all income lines of various types ultimately resulting in oyu paying tax on them.

Forget cash or cash distributions ---they have no bearing. Actually cash distributions from an "S" corp to its stockholder(s) are not a taxable event; therefore not taxed. Its what is on lines 1 to 7 that count. Sometimes this can work for you and sometimes this can work against you; e.g. the amount of cash you receive will invariably be different than what's on lines 1 to 7; hopefully cash is greater, but not always.

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