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As a former CPA for many years and now an Enrolled Agent, it's unclear to me what the issue is here. Unless your client is required to provide some third party Compiled, Reviewed or Audited Financial Statements, most small business tax returns are not prepared according to GAAP. In fact, most small business tax returns are prepared using "tax basis" accrual or "tax basis" cash methods of accounting or some hybrid method. My core practice for the last 27 years is based on providing 'internal use" monthly financial statements which are either accrual or cash "tax basis" statements, not GAAP The statements that I provide my clients do not have any supplemental notes or disclosures. My clients have been able to obtain bank loans based on these "internal use" statements. In fact, in 27 years I have never had a loan officer question or reject the statements that I provide my clients. As far as I am concerned, until the IRS affirmatively requires the capitalization of operating leases, this is a non issue.

From the instructions for Form 1099R regarding loans treated as distributions: Subsequent repayments. If a participant makes any cash repayments on a loan that was reported on Form 1099-R as a deemed distribution, the repayments increase the participant's tax basis in the plan as if the repayments were after-tax contributions. However, such repayments are not treated as after-tax contributions for purposes of section 401(m) or 415(c)(2)(B) If you show them the instructions, do you think they will realize that it does have to be treated as paid with after-tax money?

Thanks so much! I'm not normally this dense. I did have them in yesterday and they don't really care what I do. They are elderly and this stuff makes them nuts, too. I just want to prepare the return correctly and not cheat them. It will not have any effect on this year, but it may on later years.

Why don't you have a discussion with your clients explaining to them that the situation is unclear due it being new tax law with numerous gaps in the rules and regulations. Give them clear explanations of the dollars involved and let them decide. Don't apologize or get too deep in the weeds. It's doubtful that you will find any more clarity by doing more reading.

Husband did not pass away, but is now deep into early-onset Alzheimer's so not remembering receiving a gift from his father. His father did pass away, but gifted the shares in the company while still alive. So, the two men most involved with that company are not available to answer questions or recreate anything about the past. The CPA was reporting partner wages on a 1099-MISC, so I don't know how much I trust his accuracy. By the way, my father is John Brown! I just received an amended K-1 for a partnership on the same joint return as my main question re an S-corp K-1. The partnership now has Box L information, but I had suspected it was negative. Nice to have something on paper. Still waiting for wife who is dealing with mother in law re gift tax return &/or father's last K-1 plus a couple more K-1s prior to coming to me, so I can carry husbands basis forward againts the large distribution he received when the S-corp dissolved. This return has four partnership K-1s, one S-corp K-1, three Schedules C, a W-2, and a lot of medical expenses. I prepared the returns that generated two of the K-1s, so I have basis info for those two! I think I see about what all the amounts should be and how they flow, but still need some more documentation if the wife can track it down. Thank you, everyone, for pitching in to help me. I appreciate it more than you can know.