Hello,

The owner of the business is engaged in Elderly/Homecare. In the tax year 2020 of 1120S returns, he entered certain Medicaid Waiver payments received that qualify for Notice 2014-7 in the Other deductions, Schedule 1, Line 19 of 1120-S. This resulted in a Net Loss and negative Retained Earnings. 

Fast forward to 2021, the same thing happens, there's a Net Loss and a negative Retained Earnings. Plus, it lowered the basis of the only Shareholder (Owner).

Not sure if these are the right process. Really need some help/ideas. He uses Proconnect.

How will this impact the Schedule L since it lowers the Retained Earnings (because of Net Loss since it is claimed as a deduction) while the Cash is still increased by the Waiver payments received? 

Thanks much!