David Posted March 27, 2015 Report Share Posted March 27, 2015 S Corp SHs have excess distributions in 2014. The prior year tax return, prepared by another preparer, does not include a basis statement. The client's books are accrual basis and tax is cash basis.The prior year M-2 is giving the SHs credit for the accrual to cash conversion on line 3 Other Additions. The book profit is greater than tax for 2013 and 2014.The 2014 M-2 is not giving them credit for the accrual to cash conversion. Should the SHs get credit for this or was the 2013 tax return incorrect?Thanks. Quote Link to comment Share on other sites More sharing options...
Elrod Posted March 27, 2015 Report Share Posted March 27, 2015 A real tough question to answer.......... I would want an internal audit to satisfy all facts. Quote Link to comment Share on other sites More sharing options...
David Posted March 27, 2015 Author Report Share Posted March 27, 2015 Yes, I am planning to go back through previous tax returns if the client can't get basis statements. The client's books don't match the tax returns because they were never given adjusting entries.My main question is whether the accrual to cash conversion should be treated as an addition on line 3 of schedule M-2 if the book profit is greater than the tax profit. Quote Link to comment Share on other sites More sharing options...
KEYWEST_RICKS Posted March 27, 2015 Report Share Posted March 27, 2015 i would say no..... AAA should not be increased by a timing adjustment. Quote Link to comment Share on other sites More sharing options...
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