I have client with distribution in excess of AAA. I know this should be capital gain, but can't find where to enter info in ProSeries. They were never a C Corp. Distributions $50KBasis $16KBeginning AAA $14KThe program is limiting the distribution to $14. I thought I should enter entire distribution and it would carry, but it isn't. Any ideas on how to make the program work, and where to enter?
You probably will not find anything in the PS program. Since you know it is a gain, add it to the footnotes on the K-1 and my ubiquitous
"Please see your tax advisor regarding proper treatment of this item."
I was hoping you would answer - you seem very knowledgeable. I have read several posts that say the "most correct" way is to create a shareholder loan instead of capital gain.
Does anyone have an opinion on that?
Also, would capital gain be amount above AAA or amount above basis?
Open your client's return and go to Sch M2. Click or place your cursor on line 7 in the AAA column. Click the Govt Inst icon. Scroll down to the last paragraph entitled 'Schedule L Balance Sheet Per Books'. Click on the link to access Schedule L, Schedule M-1, etc. Scroll down to the paragraph that discusses 'Distributions'. Read the discussion in the first paragraph then click the link to IRC Sec 1368. This is one of the easier sections of the IRC to read. Read paragraph (a) General Rule. It is straightforward, short, and easy to understand.
I hate to be dense here, but I can't seem to find the correct input in ProSeries. I have put the entire distribution on Sch K line 16. The M-2 has the allowable part only $14K.
I can't find where to put the difference - the first $16K reduces the basis, and the remaining $20K which will be reported as capital gain on 1040, or for which I will set up a NR from SH.
