No, distributions are not an additional or secondary source of income for qualifying purposes and cannot be used in the absence of business earnings for qualifying purposes. A documented history of distributions demonstrates that business income has been received by the borrower. When the borrower cannot document a history of distributions consistent with the amount of business income used to qualify, the lender can alternatively confirm the business has adequate liquidity to support the withdrawal of earnings.
For additional information, seeB3-3.3-07, Income or Loss Reported on IRS Form 1065 or IRS Form1120S, Schedule K-1.
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