It appears the income was not from a mine but currencies. They will be receiving a 1099 in the name of the S Corp. Treat as either Capital Gain Income or Other Income on K-1? What I'm concerned about is Passive Income. If I treat as Other Income, it will not count as Passive Income and just be taxed to each shareholder. Their has been no income generated by this S Corp since formation. Only Capital Contributions on Balance Sheet. No wages, yes I'm not sure they have put in any time to be paid reasonable compensation. So can they take distributions in proportion to their shares? Worried with all the upcoming audits and the focus on reasonable compensation! Help!