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The family attribution rules are applied regarding the SEHI. The presentation for that was correct. See IRC Code Section 318's Family Attribution Rules.

My understanding has been that if there are no E&P (which is the case for most of my clients) then paid-in capital CAN affect the taxability of the distribution because it will increase the stockholder's basis and therefore could be distributed as part of tax-free distributions. If, however E&P exists, then the taxability of the distribution is determined with reference to AAA, which does NOT include capital contributions. I looked for some guidance and found this in this article (https://www.forbes.com/sites/anthonynitti/2014/04/08/tax-geek-tuesday-are-those-s-corporation-distributions-taxable/#71dcc8d06a22) in Forbes: Stock Basis ... A shareholder must increase the basis of his S corporation stock for capital contributions, items of income (including tax-exempt income), and the excess of the deductions for depletion over the basis of the property subject to depletion.... ..Of utmost importance is the order in which these adjustments are required to be made. This is because while distributions reduce basis, in many cases, it is the shareholder’s stock basis that will in turn determine the taxability of a distribution... Accumulated Adjustment Account ...The maintenance of the AAA is critical when an S corporation possesses accumulated E&P because it is the AAA balance that will serve as the line of demarcation between those distributions made from S corporation income, which should not be taxed a second time, from those made from C corporation E&P, which must be taxed as a dividend to the recipient shareholders. The larger the AAA balance, the more likely a distribution will not be taxed as a dividend. Each year, an S corporation must adjust its AAA in a manner similar to a shareholder’s required adjustments to stock basis. Unlike stock basis, however, the AAA is a corporate-level attribute and is generally not affected by shareholder-level transactions like sales or exchanges. Specifically, an S corporation increases its AAA for the same items that increase basis, except AAA is not increased for capital contributions or tax-exempt income. Similarly, AAA is decreased for the same items that decrease basis, except for non-deductible expenses related to tax-exempt income. Unlike stock basis, AAA may be reduced below zero, but only by losses, not by a distribution....

Lynn has it correct. Not all preparers do it this way, it is one of those kinda ignored rules in S Corps. But persons related to the shareholders are treated as if they are shareholders. Tom Modesto, CA

I've read on other boards a lot of other programs do this. I'm not surprised ATX doesn't.

The new 1040 would be a bow tie.

Preparing a return today for a new client. She wants to claim her grandson on her return and take HOH. Her son tells her he did not take the kid. She hands me his 2018 return because she does not trust the kid. So I open the return prepared by another firm, and what do my eyes behold.....a 1 page tax return! Someone has software that will print page 1 and page 2 of the 1040 on one page. I want it … I Want it...I Want IT...IWANTIT! Tom Modesto, CA

I have no disagreement with what jayla248 posted. The adjustment of stock basis is at the level of the shareholders personal taxes not at the S-corp book accounts, although the corp may keep track of it for the shareholders. For taxation a S-corp is the same as a C-corp except for taxation of taxable pass-thru income/loss. S-corp distributions in excess of the AAA account requires a filing of a 1099-D showing a dividend or stock distribution-as the case may be. A corporate AAA book account may show a negative balance but not for purposes of personal shareholders deduction calculation. When “capital” is distributed it is at fair market value (appraisal value) of the Corp verses personal stock basis resulting in capital gain or loss at the shareholders personal stock basis (same as C-corp). [Example: book value of building is zero but market value is one million therefore FMV v. Stock basis=gain just like sale of stock] Contributions (paid in) to capital increase shareholders personal stock basis but cannot be returned (v. Loan) without being classified as “capital” distribution at fair market value. Paid-in-capital is shown as separate book account only to distinguish between par value stock accounting. Loans should be documented and never be capitalized as that is what the IRS wants to force capital gain tax when taxpayer decides to take his loan back without telling you!

You should still be able to take the first 6 months as a deduction because it is on the W-2.

With regards to capital which includes paid in capital there is no difference between a C or S corp. S-corp is not a partnership where capital can generally be returned tax free. S-Corp distributions of “AAA profits” pass tax free is the ONLY difference from a C-corp. Distribution of S-corp capital is subject to capital gain the same as a C-corp.

For this purpose, the SEHI deduction is the same as for the actual SH. Did I correctly understand your question ?

I really don't want it. I like to print the forms as they officially are. I explain to the client the new forms and that the lower half is supposed to be blank. I'm still trying to get to know where everything is and what Schedule ties in where. Printing page 1 & 2 on the same page will only confuse me more.

In this case it sounds like the property and mortgage were held by the individuals instead of the partnership. Otherwise I agree, it would then be treated as a 736(b) payment.

It's more like a combo of the (old) tie and a new-not-improved big giant clown bow tie with the expansion to include up to six schedules. lol

Relief from a partnership liability is considered a deemed distribution and treated the same as cash received in liquidation would be.

I've been doing something pretty close to 1 March each year. Now some simpler ones come in after that and get prepared, but I don't announce that. I think I'm stopping with what I have right now. As it is, I have a 2017 that I promised, partnerships and S-corporations with 15 March deadlines, and a taller than normal stack that arrived as early as 1 February. That's right, I'm a month behind already. My usual flurry is 22 February when a dozen arrive in a day, 20 in a week, leaving me weeks behind suddenly. This year the flurry arrived 12 February, and I've been buried every since. I'm making sure that everyone knows from now on that they ARE going on extension. I don't care if they upload or drop through my mailslot and run, I'm tracking them down to tell them they are on extension. (Well, I do have a couple of March appointments that I rescheduled from February that I guess I have to prepare on time.) The problem clients are the ones that remember dropping off in February and don't remember bringing me more stuff in March; they complain that it takes me three months to prepare their returns.) I answered the door this week in my pajamas to a client dropping off. Well, leggings, tee, and fleece top, with fuzzy slippers. That's how I work when no clients are due. With clients, I still go for comfort: leggings, long-sleeved tee, long vest or sweater, but with actual shoes and socks. I might wear jeans. I might even wear dress slacks. But, I've really lived in leggings since my hip replacement. No tie and blazer, but the long vest or sweater does tie the outfit together a bit.

Thanks, all. I was hoping against hope that SOMEONE had a magic wand that would get me out of the 3115 (which I really do NOT feel like doing for this client). Sigh; there's no way out of it. Even if the rental was fully depreciated (not quite; 20 years not 27.5), there were renovations plus the personal unit was rented out for a year and a half. Blarg. This is going to be one nasty long slog, but hey - that's why I get the small bucks, right? Whimper.

>They were never really loans, and I always catch them in the year they happen and record them as additional paid in capital. < Other than a convenience for you please explain the advantage for the owner/shareholder. Please explain how the owner gets his money back tax -free if he wants it from a C-corp. Please tell us it was the C-corp owner/shareholder that made the decision to capitalize.

I've already filed some extensions. Planning to get my own handled first of the week. Everything after March 8 will automatically go on extension unless it's an obvious slam dunk on the first pass. No exceptions.

Capitalizing a shareholder loan to a C-Corporation is never a good idea as the shareholder can't just take the money back out tax free. Any distribution from an equity account has to be at fair market value of the corporation with taxable gain.

I think you have prejudged this situation. The name of the presenter and coauthor of the seminar I attended yesterday is Christopher Hesse, who is a National Tax Partner for a National Accounting Firm and who also is currently the Vice Chairman and the Chairman Elect of the AICPA Tax Executive Committee . He has had multiple meetings with the Senior Staff of the Joint Committee on Taxation who write the Blue Book which is official Statement of Congressional Intent with respect to the TCJA. He has also has had multiple meetings with senior members of the Treasury Department with respect to the TCJA. Mr. Hesse said, that it is the clear intent of Congress and the administration for Section 199 A and QBI to be interpreted liberally. I have been attending this seminar for many years and place far more value on what I learn there than any other source. However as a famous person once said," The thing about opinions is that everyone has one." I will sleep quite comfortably following Mr Hesse's advice.

As I previously mentioned, I attended an all day seminar today sponsored by the OSCPA where the presenter spent at least 3 hours on 199 A. I think most members of our profession, including me are strongly influenced by what we already know about how tax law and rental real estate intersect. The problem 199 A presents to both us and to the IRS is that TCJA does not cite or reference most of those familiar Code Sections. All of those key phrases we have etched in our brains with respect to rental real estate are actually impediments to understanding 199 A which is exactly why the guidance from the IRS has either been either unclear or yet to be written. To paraphrase the ancient chinese curse, we are living in interesting times.

Just so that you aware, the definition of a "real estate professional" has nothing to do with whether an activity does or does not reach the level of an active trade or business, which is based on a totally different section of the code.