S Corp: AAA Adustment Account

Question 2

What is the AAA account

Answer 2

Accumulated adjustments account keeps track of earnings and profits throughout the years to know what income has already been taxed to shareholders so they are not taxed again.

Question 3

What Items increase the AAA account?

Answer 3

Ordinary Business Income and Seperately Stated items.

Question 4

What decreases the AAA account?

Answer 4

Ordinary Business losses, Seperately Stated losses or deductions, non deductible expenses, and Distributions to shareholders.

Question 5

When do Distributions get calculated with the AAA account?

Answer 5

Distributions are the last part of the AAA calculation each year and they cannot reduce the account below zero. Although, Business losses can reduce the account below zero.

Question 6

Does tax exempt income and related tax exempt expenses, i.e. life insurance proceeds impact AAA account?

Answer 6

No. Tax exempt income and related expenses do not affect the AAA account.