Discussion:AAA for S corp

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Discussion Forum Index --> Basic Tax Questions --> AAA for S corp

Discussion Forum Index --> Tax Questions --> AAA for S corp

Nshnider (talk|edits) said:

27 April 2014
Have a client that has 2 stock holders one 52% other 48%. they take disproportionate distributions and at end of your I proportion them to either A/R or A/P . Is there any problem with using the AAA account to dump the difference in? If so what account would you suggest be used?


Kbairtax (talk|edits) said:

27 April 2014
Unless my brain is on off mode, the distributions hit AAA to the extent it is positive. So if the distributions are not what they should be, then would you have to make the adjustment in the form of a loan from or loan to in order to protect the s election? Basically someone took too much and they need to give it back. That's how I have always done it.....

JR1 (talk|edits) said:

April 28, 2014
In my opinion, never ever touch AAA unless you can call it a distribution. Use AR, AP for the usual day to day stuff, and then clear those off at year end with one distribution of profits. By definition with your terminology, you don't have an S corp any longer. There can never be disproportionate distributions (that remain, anyway, so why chance it? Why give an auditor an opening?).

Captcook (talk|edits) said:

28 April 2014
There was a case in the last couple of years that allowed an s-corp to maintain its s-election despite several years of disproportionate distributions as long as they were corrected within 5yrs or so. However, I would not chance it. There are several discussions on this topic. I think JR has suggested before to post all distributions to a SH loan account and clear this at the end of the year to distributions. I fully agree with JR that only those amounts truly called distributions (or redemptions, if applicable) should hit AAA.

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