Line 17 of the S corporation K-1 reports a code of AC and reports an amount which is the gross receipts from page 1 of 1120S. I do not believe this should be reflected on the K-1. There is no attached statement saying what line 17 code AC is. Anyone know whats going on with this?
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Code AC is for "Gross receipts for section 448(c)"
Here's the link to the 1120S K-1 instructions. Refer to page 24.
https://www.irs.gov/pub/irs-pdf/i1120ssk.pdf
IRC §448 discusses which business entities can and cannot use the cash method of accounting. C corporations, partnerships with C corp partners and tax shelters are prohibited from using the cash method UNLESS they meet the gross receipts requirements of 448(C). This doesn't apply to S corporations because C corporations can't be S corp shareholders; neither can partnerships. So there is no need to pass this information through to the shareholders. I think this is a LaCerte error and needs to be fixed.
It's on the list of S Corp codes, so it is a valid K-1 item.
What if client has a Schedule C business, too (or 2 or 3)?
What if shareholder also owns a C Corp, etc?
There are situations where this info could be needed.
What is the harm in having it on the K-1?
It could be confusing to the shareholder, don't you think? The reporting is only applicable to C corporations or partnerships that have C corp partners or tax shelters. I think it's a mistake to report this because I think it's wrong. I did find a way to get the statement to go away - on the input screen for line 17d is an item for an override of 448 (c) receipts. Put in a negative 1 and all the statements and info go away.
Just one more comment - this code section is about the cash method of accounting. If your shareholder is an individual, regardless of what he owns, his method of accounting is cash.
I have the same issue. I cannot seem to get it to go away.
IRS Pub 538, page 4
Individuals
Generally, individuals must adopt the calendar year as
their tax year. An individual can adopt a fiscal year if the
individual maintains his or her books and records on the
basis of the adopted fiscal year.
For a Sch C, or F, they could use accrual.
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