I was handed an S-corps books and asked to prepare a final return. I have (75000) in loans from shareholders and no assets or other liabilities. Where do I close this in ProSeries?
Whichever account has the $75k debit.
(Treat it as if the shareholder contributed the loan to capital, if that's more to your liking.)
I understand the closing to RE. There are no assets or additional liabilities. I guess my question goes a bit further...where in ProSeries do I do this. I chave a CPA telling me that the shareholders will take this unpaid loan as a loss with the closing of the books, so, it should pass to their K-1's... I know the entry into QuickBooks, but not sure how to relate it to the tax return.
It's a balance-sheet only entry. If your 1120S has no Schedule L, you wouldn't need any entry at all for it. (In Lacerte, you'd just leave the ending balance sheet blank, and call it good.)
Any remaining basis in that debt would be handled at the 1040 level, with or without the final 1120S. My guess is that the shareholders have no debt basis remaining, since the debits had to have gone somewhere. It's possible that Shareholder 1 has losses suspended for lack of basis, and Shareholder 2 has remaining debt basis, but I'd be mighty ticked if I were stuck with $75k in capital losses and my buddy walked away without paying a dime.
Worthless stock on Sch D.
