I have an individual client who received a 1120S K-1 with box 17 filled out with code AA for excess taxable income .
I believe there is no tax impact but that this amount reduced basis in the Sub S. I wanted to verify that a it is a large amount.
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Don't think it reduces basis, but I am not positive without doing research. Here are IRS instructions for line 17 AA:
Code AA. Excess taxable income.
If the S corporation is required to file Form 8990, Limitation on Business Interest Expense Under Section 163(j), it may determine it has excess taxable income. Report this amount of excess taxable income on Form 8990, Schedule B, line 45(c), if you are required to file Form 8990. See the Instructions for Form 8990 for details.