Where to Enter Shareholder Distributions in Drake Tax
On the DIST screen. Distributions keyed there flow automatically to Schedule K line 16d, to each shareholder K-1 on their pro rata share, and to Schedule M-2 line 7, where the amount may be limited. Overrides are available on the K1E screens, and using them without a DIST entry produces EF Message 0427.
- Enter the total on DIST
- Leave the K1E overrides alone unless you need them
- If you do override, override every shareholder
- Check Schedule M-2 line 7
- Then test against basis
- Data entry
- Screen DIST
- Distributions
| Trial balance account | Drake Tax screen and field | Lands on |
|---|---|---|
| Shareholder distributions | Screen DIST | Schedule K line 16d, K-1 box 16 code D, M-2 line 7 |
| Non pro rata allocation | K1E screen, Overrides tab, line 16 code D | That shareholder K-1 |
| Overrides without a DIST entry | EF Message 0427 | Blocks e-file |
| Over allocated overrides | Drake adjusts the rounding shareholder to reconcile | Each K-1 box 16 |
| Owner pay miscoded to expense | Move it to DIST. It is not deductible | Nowhere on page 1 |
| Basis effect | K1E screen, Basis Wks tab | Form 7203 on the shareholder return |
Skip the spreadsheet template. Get a Drake ready import file in minutes.
Try it freeWhere to Enter Shareholder Distributions in Drake Tax on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 42,800.00 | |
| 1200 | Accounts receivable | 68,500.00 | |
| 1300 | Inventory | 55,000.00 | |
| 1500 | Equipment | 145,000.00 | |
| 1510 | Accumulated depreciation | 47,500.00 | |
| 2000 | Accounts payable | 28,400.00 | |
| 2100 | Accrued expenses | 9,200.00 | |
| 2400 | Notes payable | 92,000.00 | |
| 2450 | Due to shareholder | 15,000.00 | |
| 3000 | Common stock | 10,000.00 | |
| 3900 | Retained earnings | 86,300.00 | |
| 3950 | Shareholder distributions (the account this page is about) | 52,000.00 | |
| 4000 | Gross receipts | 612,000.00 | |
| 5000 | Cost of goods sold | 318,000.00 | |
| 6000 | Salaries and wages | 88,000.00 | |
| 6050 | Officer compensation | 72,000.00 | |
| 6300 | Depreciation expense | 21,500.00 | |
| 6900 | Other operating expenses | 37,600.00 | |
| Total | 900,400.00 | 900,400.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Shareholder distributions | 52,000.00 | |
| Cash | 52,000.00 |
| Account | Debit | Credit |
|---|---|---|
| Shareholder distributions | 6,400.00 | |
| Other operating expenses | 6,400.00 |
One screen, three destinations
A total on the DIST screen reaches Schedule K line 16d, each shareholder's K-1 on their pro rata share, and Schedule M-2 line 7. Nothing else needs entering for the ordinary case.
That is worth knowing because the instinct is to look for a distributions field on the M2 screen. M-2 receives the figure; it is not where the figure is entered.
The override trap
The K1E screens have overrides on line 16 code D, for the case where distributions genuinely were not pro rata. Two failure modes come with them.
EF Message 0427 appears when overrides are entered on the K1E screens, Overrides tab, line 16 code D, with no entries on the DIST screen. It blocks e-file until resolved.
Silent reallocation. If the overrides allocate more or less than the total distributed, Drake adjusts the rounding shareholder to reconcile the K-1s to Schedule K. Drake's own example: a $100,000 total with overrides of $15,000 and $95,000 results in the second shareholder receiving $85,000, not the $95,000 that was typed.
So overrides need to foot to the total, and they need the DIST entry behind them.
Non pro rata is a question before it is an entry
S corporation distributions are supposed to be proportionate to ownership. Disproportionate distributions threaten the single class of stock requirement, which is a far larger problem than the tax on the distribution.
Before overriding the allocation, it is worth establishing what actually happened. Sometimes it is a timing difference that reverses. Sometimes the payment was really a loan, or compensation. Occasionally it is a genuine problem to address before filing.
The basis question M-2 will not answer
Schedule M-2 limits the distribution against the accumulated adjustments account. That is an entity level test, and it is not the test that decides whether the shareholder pays tax.
A distribution is tax free to the extent of the shareholder's stock basis and generally capital gain beyond it. The Basis Wks tab on the K1E screen estimates that at the entity level, and the real computation happens on the shareholder's Form 7203.
Tax return treatment
| Form | Line |
|---|---|
| Form 1120S | Schedule K line 16d, Schedule M-2 line 7, K-1 box 16 code D |
| Form 7203 | Where the shareholder tests the distribution against basis |
Common questions
What screen are S corporation distributions in Drake Tax?
The DIST screen. Amounts there flow automatically to Schedule K line 16d, to each shareholder K-1 on their pro rata share, and to Schedule M-2 line 7, where the amount may be limited.
What is EF Message 0427?
It appears when distribution overrides are entered on the K1E screens, Overrides tab, line 16 code D, without any entries on the DIST screen. Because it is an EF message it blocks e-file until resolved.
Why does a shareholder K-1 show a different distribution than I entered?
Because the overrides did not foot to the total. When the allocation entered is more or less than the amount distributed, Drake adjusts the rounding shareholder so the K-1s reconcile to Schedule K, which can silently change the figure you typed.
Does Drake check distributions against shareholder basis?
Only loosely. Schedule M-2 limits the distribution against the accumulated adjustments account at the entity level. Whether the shareholder owes tax depends on stock basis, estimated on the Basis Wks tab of the K1E screen and computed for real on the shareholder Form 7203.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 18, 2026.