Negative RE

[Unregistered]

Client has negative Retained Earnings on Balance sheet for 2005 (-$92000.)

What should I do? Just show same way on tax return in schedule "L"?

Thanks.

[OldJack]

Sch-L is what it is and should report what it is. I assume you are looking at a S-corp. The only question, is this years current net operating loss, if any, deductible by the shareholder. If so the shareholder may not be able to deduct the current year loss unless he has basis and/or a loan due him from the S-corp that gives him basis to deduct the loss. If the shareholder does not have a loan to the corporation for as much as the negative retained earnings he may have a return of capital or taxable deemed sale of the S-corp stock.

If it is a C-corp that is what it is and any current year net operating loss can be carried back 2 years and forward up to 20 years.

[TAX]

Sch-L is what it is and should report what it is. I assume you are looking at a S-corp. The only question, is this years current net operating loss, if any, deductible by the shareholder. If so the shareholder may not be able to deduct the current year loss unless he has basis and/or a loan due him from the S-corp that gives him basis to deduct the loss. If the shareholder does not have a loan to the corporation for as much as the negative retained earnings he may have a return of capital or taxable deemed sale of the S-corp stock.

If it is a C-corp that is what it is and any current year net operating loss can be carried back 2 years and forward up to 20 years.

This is s corp. This year scorp has net income. Again thank you.
You have been very helpful.