1120S: can additional paid in capital be returned?

Forum|Forum|6 years ago
May 3, 2020
4 replies
91 views

I want to reclassify a distribution as a return of Additional paid in capital. Is this allowed?

ProSeries Professional

This topic has been closed for replies.

qbteachmt

Level 15

Did you read the follow up in your original topic, here:

https://proconnect.intuit.com/community/proseries-discussions/discussion/balance-sheet-problem-when-asset-is-depreciating/00/83162

Because there, it seems your use of the phrase Additional "Paid In Capital" on that topic seems to be Debt. Distributions are Equity. There would be repayment of debt if that is owed to someone also able to take distributions, but debt payments are made per the debt or loan instrument or Note Payable including interest if not stated, then imputed.

Don't yell at us; we're volunteers

G

Golfer2016Author

Level 5

Thank you. No, it is an equity. Line 23 of Schedule L.

If I can just return the capital (which is now in additional paid in capital), as opposed to making a distribution, Retained earnings don't go negative. There is just one shareholder so it may not matter as you point out "equity account" is an "equity account"

qbteachmt

Level 15

"as opposed to making a distribution, Retained earnings don't go negative."

There are "ordering rules" and my understanding is that distributions are first considered to be from Current Earnings, then Retained Earnings, and so on down to paid in capital; then as that goes negative, it becomes taxable income.

As I stated, I'm not a CPA. I recommend you keep up this conversation so that others can chime in.

Don't yell at us; we're volunteers

Accountant-Man

Level 13

Do you know how APIC was created in this company? Maybe it was misclassified when the company was created.

** I am "Elevating with Intention!"

Sign up

Login with SSO

Let's get you signed in

Login with SSO