S-Corp Distribution in excess of basis Schedule L

[Gretel]

Everything is fine on my tax return (ProSeries) but my balance sheet is off by the excess distributions. I have to override retained earnings to make it balance, is that correct? It won't affect the basis since shareholder will be taxes on 1040.

[Gretel]

I am still hoping......maybe BHoffman will read....

[Maribeth]

Retained earnings is retained earnings. It is not basis, AAA, or any other account. On a balance sheet, it is the net of assets - liabilities - common stock & add'l paid-in capital.

If your client has taken distributions in excess of net income, then your retained earnings will be a negative number.

Adjust your retained earnings to the amount it should be on your balance sheet. Your software company is attempting to merge tax & accounting law.

Maribeth

[veritas]

Yes

Retained earnings is retained earnings. It is not basis, AAA, or any other account. On a balance sheet, it is the net of assets - liabilities - common stock & add'l paid-in capital.

If your client has taken distributions in excess of net income, then your retained earnings will be a negative number.

Adjust your retained earnings to the amount it should be on your balance sheet. Your software company is attempting to merge tax & accounting law.

Maribeth

the software may have a optional feature to prevent distributions from exceeding the AAA. Lacerte does. Why I don't know.

[Gretel]

Thank you so much, both of you. It's the only thing that makes sense.