Distributions & Basis Info

Facts

Enter the following information for a sample client:

Enter the information and view the Shareholder Basis Schedules.

Program Considerations

Other Schedule K Items

• You can use input fields in Screen 27, Other Schedule K Items to adjust various lines on Schedule K and other assorted input fields not found elsewhere in the program.
• As discussed in the Balance Sheet & M-1/M-2 exercise, the program applies distributions against the available balances in the Schedule M-2 accounts. If you enter total distributions that are greater than the total of all Schedule M-2 accounts and Other Retained Earnings (if applicable), the program applies the excess amount to reduce Retained Earnings on Schedule L, line 24. The Worksheets provide a summary of distributions and the calculation of ending retained earnings on Schedule L. To allocate the total property distributions made to all shareholders based on stock ownership entered in Screen 6, Stock Ownership, make an entry in Property distribution (including cash) other than dividends. Use Dividend distributions paid from accumulated E&P for any dividend distributions reported on Form 1099-DIV and paid from accumulated earnings and profits contained in retained earnings. You can enter specific property distributions in Screen 8, Distributions, Loan repayments, if necessary.

Shareholder Basis

The program uses the Shareholder's Basis Computation Schedule to calculate the shareholder's stock and debt basis. The schedule also provides the following information: Distributions in excess of stock basis.

• Principal amount of debt owed to the shareholder at the end of the tax year (if different than the adjusted debt basis).
• Losses/deductions in excess of basis (suspended losses).
• Gain recognized on repayment of a loan (if reduced debt basis).

The program carries items of income (loss) incurred during the year from Schedule K-1 to the Shareholder Basis Schedule. You must manually enter:

• Any other adjustments in the adjustment fields.
• The principal amount of any debt owed to the shareholder at the beginning of the year.
• The shareholders debt basis at the beginning of the year (if different from the principal amount of debt).
• Any loans made to the S corporation during the year.
• Any other manual adjustments to debt basis in the adjustment field.

If current year losses exceed the amount of stock basis, the program reduces the shareholder's debt basis if you make entries in Debt basis at beginning of tax year, if different and Principal amount of debt owed to shareholder at beginning of tax year.

If Shareholder loan repayments and Debt basis at beginning of tax year, if different is less than the Principal amount of debt owed to shareholder at beginning of tax year, the program prorates the loan repayment between debt basis reduction and taxable income.

If there is a current year net increase to stock basis and a reduced debt basis at the beginning of the year, the program makes an adjustment to restore debt basis up to the amount of principal in accordance with Regulation Section 1.1367-2. The program restores debt basis before it takes into account the loan repayments in accordance with Regulation Section 1.1367-2(d). The program prints loan repayments on Schedule K-1, line 16. The program prints a schedule (page 2 of the basis schedule) that shows the calculation of any gain on repayment of debt.

How?

To enter distributions for all shareholders:

1. Open the sample client.
2. Open Screen 27, Other Schedule K Items.
   
3. Click Items Affecting Shareholder Basis in the Section list.
   
4. Enter the total Property distributions (including cash) to print on Schedule K, line 16d from the table above. Press [F1] on this field for information on how this entry affects Schedule M-2 accounts and distributions.

To enter shareholder basis information:

1. Open the sample client.
2. Open Screen 9, Shareholder Basis.
   
3. Enter the applicable information from the Shareholder Basis table above.

Tips & Shortcuts

When entering items like loan repayments, shareholder basis info, and individual distributions, you can press [Ctrl]+[] to go to the same line of the input screen for the next shareholder.

Review

You should have entered distributions and shareholder basis information for the sample client and produced the following results on the shareholder basis schedules:

Troubleshooting

Problem: I am not generating shareholder basis schedules.

Solution: On the Settings menu, click Options. Click the Tax Return tab. In the Federal Tax Options section, set the option for Shareholder Basis Schedules to Yes.

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