1120s AAA

[miatax]

I have an 1120s on extension that I need to finish and I am stuck with the AAA.

The beginning balance is Negative (32,272)

Ordinary Income is 36,494

Other reductions is 550

The client took out 11,210 in distributions but ATX is zeroing out the ending AAA by forcing the distributions (line 7) to be $3,672 and forcing my retained earnings on the balance sheet to be zero.

Should I force R/E to be (7,537) and force the AAA to be (7,537)

Another local accountant advised me that it was ok to have negative AAA but I am still not sure about this. **Add'l info APIC is $19,564. In worse case scenario, if I leave AAA in zero, could difference in distribution be return of capital???

Help please... Thanks.

[joelgilb]

It is ok to have a negative AAA, but you should understand why it is negative. For instance, if the taxpayer took out loans and then draws on from those loans, you have a valid reason for the AAA to be negative.

As for ATX forcing distributions, I am not sure I have ever seen this. I have always entered the draws and distributions manually.

You are indicating that:

BB = (32272)

Inc = 36494

oth red = 550

and dist = 11210

You should not have to force the above, just enter the Dist and everything should flow

then AAA looks like it should be (7538)

[miatax]

Thank you!! Now I realized there was a check off box to 'allow distributions to go in excess of AAA'. Now it works.