I have a S-corp with a similar situation, I don't believe the answer would be any different with the facts given for a S-corp or a partnership (I know loans are treated differently between S-corps and partnerships, but loans are not relevant in my example).  Do you have an opinion on whether $5,000 or $1,000 is the correct taxable income in year 2? And any advise on where I get any guidance on how to properly enter it into proseries?