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I am the sole owner of an S-Corporation which is also my employer. My S-Corp pays me most of the revenue as 'salary' which is processed by a payroll processing company and has all necessary payroll taxes withheld.

Remaining revenues are used for expenses, and the final net profit is distributed to me periodically. What is the classification of these distributions?

Are they short term capital gains from business operations? Are they dividend income - what are they?

If they are some type of capital gain(which I doubt) - can I offset them with Short Term investment losses? I realize that if they are classified as income - that I may only take $3000/year of losses against them(after all other capital gains have been netted out).

Thanks for any help,
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