PPP Loan causing distributions in excess of earnings

[taxartist]

I am in this scenario with PPP crossing years: negative retained earnings, and distributions in excess of retained earnings as a result. Is it acceptable to defer the PPP expense recognition until 2021 (cash basis taxpayer)? Or, can I create shareholder loans (2 shareholders) to balance Schedule L? Or is there some other guidance you can provide to help me get this resolved? I just think it stinks if my clients have to have capital gains this year due to the PPP loan not being forgiven until 2021. I am positive they will be forgiven the entire amount, as it was only $41k, and we have complete documentation to satisfy any requirements. Thank you for any advice you can provide.

[pamdory]

AICPA filed a request for guidance from IRS March 16th or 17th on the timing of reclassifying the PPP liability as tax-exempt income.

https://www.journalofaccountancy.com/news/2021/mar/ppp-loan-forgiveness-s-corps-partnerships-guidanc...

I'm holding some of these returns for this reason.  

[taxartist]

Thank you! I will hold onto mine as well. I will just have to explain it is the best option, considering the consequences. The shareholders are chomping at the bit to get their K-1s, but patience is called for in this situation.