Discussion:Accrual Basis S Corp - Sole Shareholder
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Discussion Forum Index --> Basic Tax Questions --> Accrual Basis S Corp - Sole Shareholder
Discussion Forum Index --> Tax Questions --> Accrual Basis S Corp - Sole Shareholder
| 1 April 2009 | |
| I have a new client that is the sole shareholder of an S-Corp. The prior CPA prepared the prior years tax returns for the S Corp. using the accrual basis. Using the accrual basis, the S Corp is showing a loss (mostly due to the fact that most expenses were paid with a credit card).
1) Are there any limitations - other than basis - to the losses that can be passed through to a cash basis taxpayer from an accrual basis S Corp? 2) Does the conflict in accounting methods give rise to any other issues with regards to the loss passing through to the shareholder? | |
| 1 April 2009 | |
| One issue that could have an effect is the accrual of certain expenses. You cannot accrue expenses that are paid to shareholders, (rent, interest, etc) They are deductible when paid even if the corp is an accrual basis taxpayer. It doesn't matter that the corp's books are on accrual basis and the shareholder is cash. The losses are limited to his basis, including his debt basis (but be aware of the repayment of shareholder loans with reduced basis rules), any losses not taken are carried forward to offset future earnings. | |
| April 1, 2009 | |
| Credit cards are considered paid in cash, anyway, by the way. Other than dnc's comments, no, no restrictions. | |
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