Final 1120-S Instructions for 2021
"Column (d). Other Adjustments Account
The other adjustments account is adjusted
for tax-exempt income (and related
expenses) and federal taxes attributable
to a C corporation tax year. After these
adjustments are made, the account is
reduced for any distributions made during
the year. See Distributions, later.
Tip
PPP loans. An S corporation
should include tax-exempt income
from the forgiveness of PPP loans in column (d) on line 3 of the
Schedule M-2.
An S corporation should report expenses
paid this year with proceeds from PPP
loans that were forgiven this year in
column (d) on line 5 of the Schedule M-2.
If column (a) on line 2 or line 4 of the
Schedule M-2 includes expenses paid
with proceeds from forgiven PPP loans, an
S corporation should report that amount in
column (a) on line 3 and in column (d) on
line 5 of the Schedule M-2.
If column (a) on line 1 of the Schedule M-2
includes expenses that were paid in a
prior year with proceeds from PPP loans
that were forgiven this year, an S
corporation should report that amount in
column (a) on line 3 and in column (d) on
line 5 of the Schedule M-2."