S-Corp Large Contributions

[BarbS]

I am finishing 1120S return. Dump truck business started Sept. 2005 as a partnership. Changed to 1120S for 2006. The business had a loss of $635 for 2006. The shareholders (2) made contributions to their church in the amount of $12,377 through the corporation. This causes the AAA account at end of year to be $(13,012). The shareholders equity in business is as follows: Stock - $1000, Add. Paid-in capital $15,058, and loan from shareholders $17,000. I do not do many 1120S returns and have never had a situation like this. Are there special considerations in a situation like this? Any comments will be appreciated. I don't feel comfortable about this.

[OldJack]

If I understand your numbers and assuming shareholders have equal tax basis (1000+15058-635-12377+17000=20045) in the S-corp, then there is not a problem. The charity contribution goes on Sch-K and K-1 line 13 with the K-1 with one of the codes of 13A thru 13F depending upon the type of charity contribution. The contribution reduces each shareholders tax basis but it appears that as a group each has enough tax basis that it is not a problem . The AAA account on the books/tax return of the S-corp is allowed to have a negative number, it is the individual's AAA account "share" when related to his/her deduction and tax basis on the 1040 that cannot be negative. Nothing was really accomplished with the S-corp making the contribution since it is passed thru and deducted on the 1040 Sch-A.

[BarbS]

If I understand your numbers and assuming shareholders have equal tax basis (1000+15058-635-12377+17000=20045) in the S-corp, then there is not a problem. The charity contribution goes on Sch-K and K-1 line 13 with the K-1 with one of the codes of 13A thru 13F depending upon the type of charity contribution. The contribution reduces each shareholders tax basis but it appears that as a group each has enough tax basis that it is not a problem . The AAA account on the books/tax return of the S-corp is allowed to have a negative number, it is the individual's AAA account "share" when related to his/her deduction and tax basis on the 1040 that cannot be negative. Nothing was really accomplished with the S-corp making the contribution since it is passed thru and deducted on the 1040 Sch-A.

Thanks Old Jack. That's what I thought but wanted someone else's opinion.

[veritas]

Question?

If the contribution was made by the corporation, who is on the receipt that they must have?