Discussion:RECONCILING BOOK / TAX INCOME-1120S
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Discussion Forum Index --> Tax Questions --> RECONCILING BOOK / TAX INCOME-1120S
| 13 October 2009 | |
| MY CLIENT RECEIVED A K-1 (#1065) AND I ENTERED THE LOSS OF $(24) ON PAGE 1 LNE 5 OF #1120S...BUT WHERE DO I MAKE THE ENTRY TO BALANCE MY BOOK LOSS WITH TAX RETURN LOSS FOR THE $(24)
I HAVE TRIED TO ENTER $(24) ON SCH M-1 BUT I WILL HAVE TO MANUALLY OVERRIDE THE SOFTWARE (PROSERIES-INTUIT) ....WHERE DO I PUT THE $(24) SO I CAN FINISH THIS TAX RETURN TODAY???? THANKS FOR YOUR HELP | |
| 13 October 2009 | |
| investment in partnership/LLC (we tax people sometimes call this 'basis') | |
| 13 October 2009 | |
| Thinking of the balance sheet - shouldn't the $24 loss reduce your Investment in this entity asset account? Do you not normally record this on the corp's books?
If you make this entry and adjust your book P&L for real so there is no M-1 adjustment. | |
Southparkcpa (talk|edits) said: | 13 October 2009 |
| The journal entry on the s corp books (isn't it late?) is as follows:
It follows the "Equity method of accounting" Credit Invest in partnership (asset account) Debit loss on Investment (P and L account) | |
| 14 October 2009 | |
| That would be the entry if you followed equity method. It could be that if you have <20% interest and no influence on the entity that you follow cost method as opposed to equity method and have no entry. Then you would have a difference in the investment account for book/tax purposes. | |
| 14 October 2009 | |
| UT, I honestly do not think a corporation with a schedule K-1 showing a massive loss of $24 :) is neceesarily on GAAP basis; do you? The SouthParkCPA response stands. | |
Southparkcpa (talk|edits) said: | 14 October 2009 |
| Your honorable Amirk....
Thank you and I appreciate not being over ruled. Check your robe, I put the bribe money in your left pocket. (lol)
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| 15 October 2009 | |
| The OP did title this thread "RECONCILING BOOK / TAX INCOME-1120S", so it would stand to reason their books are not on a tax basis. GAAP is a reasonable assumption to make. Excellent point raised, UT. | |
| 15 October 2009 | |
| Sorry, Captain. Too many days at sea and scurvy is setting in. Since when does "BOOK" equate to "GAAP". Book is in the eye of the beholder. In fact today, my client delivered to me a Book method consisting of just 3 accounts: Checking, Opening Balance Equity, Uncategorized Expenses. Such a simplified system is sure to bring about the demise of the hoity-toity oligarchs of FASB. | |
| 15 October 2009 | |
| Indeed, "book is in the eye of the beholder." I regularly deal with Cash, Modified Cash, Tax, and "hoity-toity" GAAP and, of course, bastardized versions in between that I get to clean up. However, my point is that in your simplified example you are likely not concerned with a book-tax reconciliation. If the OP is worried about a reconciliation he should probably let us know on what basis his books are prepared. Again, GAAP is a reasonable assumption to make in light of no other information. | |
Floridacpa (talk|edits) said: | October 15, 2009 |
| The K-1 should show the ending capital of the partner, regardless of the basis.
You need to make a journal entry to the books whereas the investment account (a balance sheet account) equals the basis on the K-1 ending capital account, and the P&L accounts equal the change in the capital account for the year (as shown on the K-1). If the difference is simply (24) of ordinary loss, then do as Southpark says. If the difference is (24) due the ordinary loss and separately stated items on the K-1, they all need to be recorded on the books. I will not get more complex than this unless you have further questions. | |
