I have a new client that has several businesses and one of the businesses is an S Corporation and has no activity since 2013. The balance sheet shows a loan from the 100% shareholder in the amount of $30,000 (rounded to keep simple) and negative retained earnings in the amount of $30,000.
I would like to make this return final.
I can see from prior year Form 1040 returns, the loan basis allowed my client to offset other business income on Form 1040. My client was able to take the loss on prior year returns and the loan basis has yet to be restored. Is he required to recognize income on the loan that remains on the balance sheet? Or is he considered "whole" because he didn't get paid back from the money he directly loaned to the S Corporation and has taken the loss on prior year returns?
I am not sure how to remove the loan from the balance sheet. I have been advised to just leave the balance sheet showing the loan and negative retained earnings but it is a final year. Does it even matter since total assets is zero and so is total liabilities?
I would like to make this return final.
I can see from prior year Form 1040 returns, the loan basis allowed my client to offset other business income on Form 1040. My client was able to take the loss on prior year returns and the loan basis has yet to be restored. Is he required to recognize income on the loan that remains on the balance sheet? Or is he considered "whole" because he didn't get paid back from the money he directly loaned to the S Corporation and has taken the loss on prior year returns?
I am not sure how to remove the loan from the balance sheet. I have been advised to just leave the balance sheet showing the loan and negative retained earnings but it is a final year. Does it even matter since total assets is zero and so is total liabilities?
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