Client received a K-1 for S-Corp with a loss for 2006 of $41,000. He also gave me copies of two checks showing he loaned corporation $55,000 in 2006. In reviewing the basis worksheet that the CPA who handled the S-Corp return did, it showed that client loaned $27,500 to S-Corp rather than $55,000. I called the CPA regarding another issue and also asked him about the discrepancy of the loan. He advised me that my client's sister (another shareholder) advised CPA that she loaned corp. $27,500 and my client loaned corp. $27,500. When I checked with my client, he said he had the checks to prove that he loaned $55,000, not $27,500. I am going to instruct my client to go back to CPA to make sure correction is done on the S-Corp books, but, unsure if client will pursue. Is there anything else that I should do or do I just claim the $55,000 loan as debt basis for client's individual return and not worry about sister who is claiming a debt basis that is not rightfully hers?? (Sister is not my client)
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CPA is probably correct
Client probably has checks totalling $55,000. He could have laundered his sister's loan through his funds and also could have been repaid $27,500.
The only salient question is how much the corporation owed to your client at year end. Not how much he loaned during the course of the year.
I think you did well by insisting the client get the CPA to re-issue the basis worksheet. That should resolve it if the CPA is wrong.
Note: CPA is probably acting on information from this guy just like you are... -
Well Peggy, For starters the sister like you said is not your client, so I would not loose any sleep about what she is doing.
As for the CPA I am not sure I would fault him or her as he/she most likely just followed what the client told him. You did not imply but I am going to take a guess that your client is not the one who deals with the other CPA. More over I do not think it is the Cpa who is responsible for maintaining the basis calculation of your client.
My Advice and I am not the for most expert on basis would be to simply recalculate the basis with the inforamtion provided to you by the client.
In a perfect world these types of things would not happen but............
Well good luck maybe someone else may have an opinion.Comment
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