Probably shouldn't post a question when running on fumes but... it seems that I may have read that for a PPP Loan not yet forgiven at 12/31/2020 but that is likely to be forgiven once the forgiveness application is processed in 2021, should be considered forgiven when preparing the 2020 1120S. If this is true, the to-be-forgiven loan proceeds would be recorded as Tax-exempt income on the 1120S for 2020 even though practically, the loan is still on the books as an SBA loan at year-end. The alternative would be to show the PPP Loan as a liability on the page 4 balance sheet for the 2020 1120S. So I guess the question is how to properly report the likely-to-be-forgiven PPP Loan on the 2020 1120S. **Apologies in the event this has already been covered previously...
-
-
I believe the proper treatment would be for the anticipated income to be recorded.
Similar to a casualty loss whose insurance proceeds have not yet been received. If PPP forgiveness is denied, then I believe an amended return would be required. But if the forgiveness revenue is not taxable, then I don't know what difference an amended returned would bring about. -
Notwithstanding Snag’s thought on this situation, it seems the proper treatment is reality - the loan on 12/31/2020 is a liability recorded on the balance sheet.Originally posted by Hoosier View Post
Most commentators, though obviously not all, concur with this position. Personally, I have the loans as outstanding liabilities on 1120-S returns I’m preparing.Comment
-
I'm still trying to understand the difference between "excluded from gross income", and "tax-exempt". To me, the latter seems to be something that is included in gross income but isn't taxed, while the former is something never included in income in the first place. I keep on seeing people refer to PPP forgiven loans as "tax exempt", but are they actually just "excluded from gross income"?
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
-
As I've said before: Debit SBA Loan payable and Credit Capital Contributions. This PPP issue has nothing to do with income......
It is a gift from US Government.Last edited by BOB W; 02-18-2021, 11:14 AM.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
-
I don't think you will find many commentators agreeing with that. I'd appreciate it if you would show me any authority that suggests your position is correct.Originally posted by BOB W View Post
When the loan is forgiven, the legislation says it is not to be included in gross income. Thus, it is book income, entered on line 5 of M1 and on line 16b of the shareholder K-1 as an increase to basis.Comment
-
So we are in agreement, It is an increase in basis to the shareholder(s) capital account(s) on the books. And yes, on the tax return those lines are noted as you said. What am I missing that you don't agree with?Last edited by BOB W; 02-18-2021, 11:31 AM.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
-
Maybe it's the water in Ronkonkoma but if you don't see the difference between what you posted in #5 and what I posted in #6, I'm at a loss for words. No more commentary from me on this issue.Originally posted by BOB W View PostComment
-
[QUOTE=New York Enrolled Agent;n304416]
[COLOR=#3300cc]I don't think you will find many commentators agreeing with that. I'd appreciate it if you would show me any authority that suggests your position is correct.
O Well
This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
-
OK you two Yankees - time to look at this from a financial as well as tax aspect. Believe it or not I was recently in Lackawanna. Ghost town.
If a PPP loan is presumed to be forgiven and resulting income recorded, there should not be a liability shown on the balance sheet. This is true regardless of whether the income is tax-exempt or not.....
If not recorded as forgiven, liability should be shown on balance sheet.
Most of what I've read tells me PPP forgiveness should be tax-exempt, even though the expenses paid from the loan are deductible. Recording as forgiven would thus not increase or decrease taxable income.
Am I going crazy or what???
Comment
-
Correct, no additional increase or decrease of income..... The fact that you can keep it, it gets recorded as a basis increase. I am not as smart as NY EA and I'm sure he is being more technical from an accounting point of view by calling it "book income". When it is all said and done He & I will end up in the same place. I truly respect him and his knowledge in tax law and his overwhelming contribution to this message board. If I fall short understanding some issues, well that's me.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
-
Bob, you are quite correct about NY Enrolled Agent. An awesome mind and thoroughly authoritative about the information given to us.Originally posted by BOB W View Post
Comment
Comment