The Sub S is insolvent and the shareholder is also insolvent. We are removing the liability and adding the COD to Adjustments to Shareholder Equity, line 25, which brings the return into balance. Is this the correct way to treat the COD since it should be non taxable.
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I'd do an M-1 for income reported on books not on tax return.
I'd do an M-1 for income reported on books not on tax return.
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