Dist in excess of RE

[TAX]

Scorp Client took too much distribution (more than RE and net income). It is $35,000 more.

If I leave it as it is on Pro series it shows Dist in excess of RE and balancehseet does not balance.

Client does not want to transfer to due from officer.

How can I handle. It will be capital gain tax, right? Does it go on K1 or should I just leave it on pro series and add to dividend on his personal return.

[Maribeth]

Scorp Client took too much distribution (more than RE and net income). It is $35,000 more.

If I leave it as it is on Pro series it shows Dist in excess of RE and balancehseet does not balance.

Client does not want to transfer to due from officer.

How can I handle. It will be capital gain tax, right? Does it go on K1 or should I just leave it on pro series and add to dividend on his personal return.

Two things are going on:

The distributions in excess of basis will be taxed on the s/h return on Schedule D. The taking into income of the distribution will restore the s/h's basis back to -0-.

The retained earnings on the corporation are what they are. You have a negative retained earnings due to the distribution and now have a retained deficit.

Maribeth

[TAX]

Two things are going on:

The distributions in excess of basis will be taxed on the s/h return on Schedule D. The taking into income of the distribution will restore the s/h's basis back to -0-.

The retained earnings on the corporation are what they are. You have a negative retained earnings due to the distribution and now have a retained deficit.

Maribeth

So where should I put -ve $35000 on balancehseet (In Liability section)? That way I can balance the balancesheet.

Thanks!

[Davc]

Negative RE goes in the RE box.