Can anyone provide a cite that says that S-Corp distributions are treated as income in an ESOP?

Or, is it just common sense? (S-Corp distribution is part of the company's earnings being distributed to shareholders, akin to dividends).

Thanks.

boberlander ---

S corporation distributions are dividends included in shareholders' income for financial reporting purposes but are generally not taxable income to such shareholders (who have already been taxed on the S corporation's income). However, IRC section 512(e)(3) exempts an ESOP from being taxed on its share of S corporation income.