Line 17 of the S corporation K-1 reports a code of AC and reports an amount which is the gross receipts from page 1 of 1120S. I do not believe this should be reflected on the K-1. There is no attached statement saying what line 17 code AC is. Anyone know whats going on with this?
IRC §448 discusses which business entities can and cannot use the cash method of accounting. C corporations, partnerships with C corp partners and tax shelters are prohibited from using the cash method UNLESS they meet the gross receipts requirements of 448(C). This doesn't apply to S corporations because C corporations can't be S corp shareholders; neither can partnerships. So there is no need to pass this information through to the shareholders. I think this is a LaCerte error and needs to be fixed.
It's on the list of S Corp codes, so it is a valid K-1 item.
What if client has a Schedule C business, too (or 2 or 3)?
What if shareholder also owns a C Corp, etc?
There are situations where this info could be needed.
What is the harm in having it on the K-1?
It could be confusing to the shareholder, don't you think? The reporting is only applicable to C corporations or partnerships that have C corp partners or tax shelters. I think it's a mistake to report this because I think it's wrong. I did find a way to get the statement to go away - on the input screen for line 17d is an item for an override of 448 (c) receipts. Put in a negative 1 and all the statements and info go away.