I am confused with the lacerte error # 253122 you know the one  "  The amount of distributions entered on schedule K lin 16D is greater than the total net balance available for distribution in all of the Schedule M-2 accounts by 177880. The amount of excess distributions ruduces the ending balance of retained earnings on schedule L. Line 24. 

But on basis schedule 

        Distributions in excess of Basis is $ 0

        Suspended loss is  $ 55363

         Why isnt the 177880 considered capital gain or taxable,  is it ever ? 

         All amounts are correct