yes it was . On the balance sheet shows him with -179,000 in retained earnings. but it does subtract it from the M-2 anaylis. The total from the m-2 shows a reduction of $283,000 in non taxable income..I would assume I would have to show as a capital gain on his  1040.  So in theory he has  a negative retained earnings and still 369,000in nontaxable earnings  on m-2 going forward. I don't like when they don't ask before they do this stuff. Sets you up for an audit when you are taking close to a 1,000,000 in distrubtions and not taking the kind of salary to justify this.