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Posted by Haskel LaPort on March 24, 2008, 2:43 pm
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> >
>>
>>
>> >> > After the sale of all assets in an S-Corp liquidation, the only
>> >> > thing
>> >> > remaining on the balance sheet is a balance in long-term note
>> >> > payable
>> >> > to shareholder. Interest was paid to the shareholder regularly.
>>
>> >> > 1) Is the note balance treated as a negative distribution to
>> >> > Retained
>> >> > Earnings to close the books? What is the treatment on the 1020S tax
>> >> > return?
>> >> > 2) Is this reported on the K-1? If so, where?
>>
>> >> > Thank you for your help!
>>
>> >> How many shareholders in the S-Corp?
>>
>> > Just 2 shareholders. My wife and I.
>>
>> Assuming you and your wife get along, I would make a journal entry on the
>> books to reclassify the shareholder note Contributed Capital. No
>> reporting
>> is required on the K-1.
>
> Can I still reclassify this note as contributed capital even though we
> have been taking interest income? If so, what date should the journal
> entry be made?
Any date after the last interest payment date. You can get fancy and you and
your wife can actually make a capital contribution and take the money back
as repayment of the note, but the effect is the same as a journal entry.
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used, >>
> << nor can it used, for the purpose of avoiding penalties >>
> << that may be imposed upon the taxpayer. >>
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========================================= MODERATOR'S COMMENT:
Please delete all unnecessary text from the prior post when responding.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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