S-corp and basis

[JCH]

Okay, another S-corp and basis question. I'm hoping someone can help me out. First year S-corp. Net income is around 40k. Distributions and Sec. 179 total about 80k, so retained earning are zero. There's about 100k of cash on the balance sheet at year-end, so I'm wondering where to allocate the remainder in the equity section. Loan from shareholder, APIC or a combination of the two? Any thoughts appreciated. Thanks.

[BOB W]

Okay, another S-corp and basis question. I'm hoping someone can help me out. First year S-corp. Net income is around 40k. Distributions and Sec. 179 total about 80k, so retained earning are zero. There's about 100k of cash on the balance sheet at year-end, so I'm wondering where to allocate the remainder in the equity section. Loan from shareholder, APIC or a combination of the two? Any thoughts appreciated. Thanks.

I need info broken down separately.

[Maribeth]

What is the balance in your common stock & add'l paid-in capital accounts? Do you have any loans from the shareholder already on the books?

Maribeth

[JCH]

First year S-corp. Shareholder opened bank account with 175,000. $100 to capital stock.
Year end bank balance 130,000

Ordinary income 40,000
Sec 179 expense 35,000
Distributions 45,000

AAA ending balance zero

Retained earnings (40,000)
Loans from Shareholder ?
Capital stock $100
APIC ?

Trying to figure out where to allocate the balance in the equity section of Sch L. I appreciate your help.

[Maribeth]

Client opened the bank account with $175,000, with $100 going into common stock. What was the rest of the opening entry?

Maribeth

[JCH]

Client opened the bank account with $175,000, with $100 going into common stock. What was the rest of the opening entry?

Maribeth

Client uses Quickbooks and does everything herself. I think QB just plugs it to retained earnings automatically. There's no separate entry by the client.

[BOB W]

Client uses Quickbooks and does everything herself. I think QB just plugs it to retained earnings automatically. There's no separate entry by the client.

You should assume it would go into "loan from officer" (liability section).. (Which has some additional issues)

[BOB W]

First year S-corp. Shareholder opened bank account with 175,000. $100 to capital stock.
Year end bank balance 130,000

Ordinary income 40,000
Sec 179 expense 35,000
Distributions 45,000

AAA ending balance zero

Retained earnings (40,000)
Loans from Shareholder ?
Capital stock $100
APIC ?

Trying to figure out where to allocate the balance in the equity section of Sch L. I appreciate your help.

What about Officer Payroll?????

[JCH]

Thank for both responses, Bob. Officer payroll is already accounted for in ordinary income. W-2 issued, so no problem there. I have to impute interest from the loans from shareholder, right? Any other issues with that category of equity?

[BOB W]

First year S-corp. Shareholder opened bank account with 175,000. $100 to capital stock.
Year end bank balance 130,000

Ordinary income 40,000 $5,000 NET PROFIT- AFTER 179 DEDUCTION???
Sec 179 expense 35,000 NOT SURE IF THIS IS PART OF THE $40,000
Distributions 45,000 MOST WILL GO TO REDUCING LOAN FROM OFFICER

AAA ending balance zero

Retained earnings (40,000) ZERO
Loans from Shareholder ????
Capital stock $100 OK
APIC ? WHAT IS APIC?

Trying to figure out where to allocate the balance in the equity section of Sch L. I appreciate your help.

SEE ABOVE NOTES

[JCH]

I think you answered the question. The remainder goes to Loans from Shareholder. APIC is Additional Paid in Capital (Line 23, Sch. L).

[BOB W]

I think you answered the question. The remainder goes to Loans from Shareholder. APIC is Additional Paid in Capital (Line 23, Sch. L).

IRS would reclassify Officer Loans to APIC if you don't have a loan agreement between both. The agreement should have a stated interest rate and that interest should be paid annually or at least issue a 1099INT to the shareholder.

[JCH]

So what's the risk of calling it Additional Paid in Capital as opposed to Loan from Shareholder? Is APIC locked up, whereas Loans from Shareholder are more fluid?

[geekgirldany]

I have a client that is in the same position. Has loaned a great deal to the S-corp.

Imputed Interest is calculated each year. S-Corp deducts interest while shareholder reports as income.

[BOB W]

So what's the risk of calling it Additional Paid in Capital as opposed to Loan from Shareholder? Is APIC locked up, whereas Loans from Shareholder are more fluid?

A big time difference..APIC requires a sale of stock.