1120-US: Changing the ordering of distributions when electing to distribute accumulated E&P (FAQ)

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Question

How does UltraTax CS change the ordering of distributions when the election to distribute accumulated E&P first is made?

Answer

UltraTax CS automatically prints the election to distribute accumulated E&P first when the Election to distribute accumulated E&P first field is marked in Screen Ms in the Balance Sheet folder.

Enter distributions up to the beginning balance of the Accumulated Earnings and Profits (AE&P) in the Dividend distributions paid from accumulated E&P field in Screen Ms. Enter any remaining distributions in the Nondividend distributions account fields in Screen Ms.

UltraTax CS applies the following ordering when nondividend distributions are entered in the Accumulated Adjustment Account column.

  1. Undistributed Previously Taxed Income (PTI) to the extent the distribution does not reduce the account below zero.
  2. Any remaining distribution will then reduce the Accumulated Adjustments Account (AAA). If the distribution reduces AAA to zero, any remaining distribution will reduce the Other Adjustment Account (OAA) to the extent the distribution does not reduce the account below zero.
  3. Any remaining distribution reduces the Retained Earnings Unappropriated (REU) account.

If you want to use a different ordering of the distributions, enter the amount of nondividend distribution (including zero) in the respective column. For example, if you have a beginning balance in PTI, but do not want UltraTax CS to allocate a distribution to this account, enter 0 (zero) in the Nondividend distributions account field in the Undistributed Previously Taxed Income column.

If you only want to print the election to distribute accumulated E&P first, but do not want to change the ordering of nondividend distributions, select the Distribute Accumulated E&P First election from the Election Description fieldview in the Election statements section on Screen Elect and do not mark the Election to distribute accumulated E&P first field in Screen Ms.

Related topic: 1120-US: S Corporation distributions and section 1368 distribution elections FAQs

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