Common questions about Distributions and Loan Repayments in Lacerte

Get answers to frequently asked questions about 1041 passthrough credits.

Table of contents:

Entering shareholder property distributions other than dividends (including cash)

This section explains how to enter shareholder property distributions (other than dividends) in Lacerte.

Where to enter

Go to Screen 27, Schedule K – Distributions.

• Enter cash distributions in Cash distributions.
• Enter property distributions in Property distributions.

How Lacerte treats non-dividend distributions

• Non-dividend distributions reduce Accumulated Adjustments Account (AAA) and Shareholder Stock Basis.
• Lacerte reduces AAA before reducing stock basis.
• If the distribution exceeds stock basis, the excess becomes a capital gain (reported on Schedule D).

Additional notes

• Property distributions may generate gain at the corporate level if FMV exceeds basis.
• When applicable, Lacerte will populate Form 1120S, Schedule K and K-1 with the calculated effects.

For a full walkthrough, see the related expanded article linked below.

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Understanding how Lacerte calculates S-corporate AAA distributions

This section summarizes how Lacerte computes AAA changes for S corporations.

Key AAA calculation rules

AAA increases for:

• Ordinary business income
• Separately stated income items
• Non-separately stated income

AAA decreases for:

• Nondeductible expenses not chargeable to capital
• Separately stated losses and deductions
• Non-dividend distributions to shareholders

Ordering rules applied by Lacerte

1. Lacerte applies non-dividend distributions against AAA first.
2. If AAA becomes zero, further distributions reduce stock basis.
3. Any distributions in excess of stock basis result in capital gain.

Where to review AAA

Go to Screen 28, Schedule M-2 → AAA reconciliation fields.

A more detailed explanation is available in the full AAA article (linked below).

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Shareholder Basis: Schedule Line 33 loan repayments to shareholder

This section explains how to enter and review shareholder loan repayments under Schedule Line 33.

Where to enter

Go to Screen 28, Shareholder Basis → Loans from shareholder.

Entering loan repayment amounts

• Enter the loan balance at beginning of year, increases, decreases (repayments), and ending balance.
• Lacerte uses these inputs to complete the Shareholder Basis Worksheet.

How Lacerte treats repayments

• Loan repayments decrease stock basis only after debt basis is restored, according to IRS ordering rules.
• If a shareholder previously had suspended losses due to insufficient basis, repayments may restore basis for those losses (if applicable).

Reviewing results

View generated details in:

• Shareholder Basis Worksheet (Forms view)
• Schedule K-1 basis limitation statements

For more information, see the full article linked in Related articles.

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Entering dividend distributions from E&P

This section covers entering dividend distributions from Earnings & Profits (E&P) in Lacerte.

Where to enter

Go to Screen 27, Schedule K – Distributions → Dividend distributions from E&P.

How Lacerte treats E&P distributions

• Lacerte treats any distribution sourced from E&P as a taxable dividend, reported on Schedule K and K-1.
• Dividend distributions do not affect AAA unless part of the distribution exceeds E&P.
• When E&P exists, Lacerte applies ordering rules:

1. Distributions from AAA (non-dividend)
2. Distributions from E&P (taxable dividends)
3. Return of capital (reduces stock basis)
4. Capital gain (if distribution exceeds stock basis)

Review and validation

• Confirm E&P entries in Screen 28, Schedule M-2 (E&P fields).
• Review results on Schedule K-1, Line 5 (Dividends).

See the full E&P distributions article for expanded guidance.

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Related articles

• 1120S Entering Shareholder Property Distributions Other than Dividends (Including Cash)
• Understanding how Lacerte calculates S-Corporate AAA distributions
• 1120S Shareholder Basis Schedule Line 33 Loan Repayments to Shareholder During Tax Year
• Entering Dividend Distributions from E & P in the S Corporate Module