It is my understanding that distributions are not directly limited by AAA, but distributions in excess of basis are treated as sales of stock and subject to capital gains. Distributions in excess of AAA, is a good indicator that distributions could be taxable, but not the indicator itself or any limiting factor.

The distribution itself is not limited in any way, only the tax treatment of the distribution is called into question. Section 1368 says, "If the amount of the distribution exceeds adjusted basis of the stock, such excess shall be treated as gain from the sale or exchange of property." No language disallowing the excess distribution, only the tax treatment of the excess distribution.

So why the limitation by ProSeries?