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Calculations of Stock Basis, AAA, OAA, PTI, Retained Earnings, and AE&P

This template calculates stock basis, the accumulated adjustments account (AAA), the other adjustments account (OAA), previously taxed income (PTI), retained earnings (RE), and accumulated earnings and profits (AE&P).

Entering Information

All of the information needed to produce the computation is entered on the Input worksheet.  The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells.

Permanent differences in the book/tax treatment of items (such as nontaxable and tax-exempt items) and the Section 179 deduction are reported on the Input worksheet, with references to the Schedule K line number. (These amounts affect stock basis and are shown on Schedule K of Form 1120S).  Timing differences (such as the difference in book/tax amounts) are reported in the other “timing” differences section. (These amounts do not affect stock basis and are shown on Schedule M-1 of Form 1120S.)

The Section 179 deduction is entered as a negative amount under “Loss deduction and other negative items” and is also entered as a positive amount, that is, it is added back at the end of the worksheet under ”Deductions included on the return (Schedules K and K-1) not charged against book income this year.”

Enter the following information in the white input cells, as applicable, for each category, (i.e.) Stock Basis, AAA, OAA, PTI, RE, and AE&P):

Income and Gain Items:

• Ordinary income (nonseparately stated, if positive)
• Other income items:

- Rental real estate activities (if positive)

- Other rental activities (if positive)

- Portfolio income

- Capital gain, collectible gain, and unrecaptured Sec. 1250 gain

- Net gain under IRC Sec. 1231

- Other income

• Tax preference amount of non-oil-and-gas depletion
• Tax-exempt interest income
• Other tax-exempt income
• Other items reported separately

- Investment credit recapture basis adjustment - See IRC Secs. 49(b), 50(a), 50(c)(2), and 1371(c). (Basis restoration is due to credit recapture.)

Loss, Deduction, and Other Negative Items:

• Ordinary loss (nonseparately stated)
• Other loss and deduction items:

- Rental real estate activities (if negative)

- Other rental activities (if negative)

- Portfolio loss

- Capital loss and collectibles loss

- Net loss under IRC Sec. 1231

- Other loss

- Charitable contributions

- Section 179 expense deduction

- Portfolio deductions

- Other deductions

- Investment interest expense

- Foreign taxes

- Section 59(e) expenditures (circulation, research and experimental, intangible drilling and development, and mining development and exploration expenditures)

• Nondeductible expenses.  Basis is reduced by nondeductible items before it is decreased by items of loss or deduction. However, the shareholder may elect to reduce basis by items of loss or deduction before nondeductible items:

- Federal taxes attributable to any C corporation tax year. AE&P is decreased only by tax credit recapture under IRC Secs. 49(b) or 50(a) and federal taxes paid by the S corporation that relate to the C corporation period; other federal taxes do not reduce AE&P.

- Disallowed T&E expenses, fines, penalties, and so forth

- Deductions related to tax-exempt income

- Life insurance (Depending on your treatment, this could include at least a portion of any premiums for officers' life insurance.)

• Other negative items reported separately:

- Investment credit basis adjustment - See IRC Sec. 50(c)(1) and (5). (Basis reduction is for the amount of credit claimed.)

- Oil and gas depletion to extent of property basis

• Beginning of year balances
• Capital contributions/stock purchases
• Distributions [Distributions cannot reduce any amount (column, for example), other than retained earnings, below zero.]
• Nondividend distributions, such as return of basis (Distributions cannot reduce basis or AAA below zero. Thus, the amount entered in the Stock Basis and AAA columns cannot exceed the subtotal on the preceding line on the Input worksheet. If the corporation has AE&P, the amount in the Stock Basis column cannot exceed the amount entered on this line in the AAA column.)
• Dividend distributions
• Nondividend distributions in excess of stock basis (The shareholder reports capital gain equal to this amount.)
• Carryover of prior years’ net losses
• Other adjustments:

- Current year “net income” is used to restore debt basis.  Make an entry on this line only if (a) the netting of income and gain items, loss and deduction items, and distributions results in a positive number, and (b) debt basis has been reduced by losses after 1982. The "net positive adjustment" is used to restore debt basis before stock basis. The restoration amount should be entered on this line.

- Reduction due to stock transfer

- Increase (decrease) for nontaxable reorganization, and so forth

Other “Timing” Differences:

• Income included on the return (Schedules K and K-1), not recorded on the books this year:

- List descriptions

- List amounts

• Expenses recorded on the books this year, not included on the return (Schedules K and K-1):

- Depreciation

- Other items (list descriptions and amounts)

• Income recorded on the books this year, not included on the return (Schedules K and K-1):

- List descriptions

- List amounts

• Deductions included on the return (Schedules K and K-1) not charged against book income this year:

- Depreciation

- Other items (list descriptions and amounts)

• Net losses in excess of stock basis (Stock basis can never be less than zero. If this worksheet shows stock basis to be negative, add an amount necessary to cause the stock basis to equal zero. The amount entered on this line can be deducted if the shareholder has sufficient debt basis; otherwise, the amount is a suspended loss carryover to the subsequent tax year.)

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