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Line 17 of the S corporation K-1 reports a code of AC

Level 1

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?

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5 Replies 5
Level 2

Code AC is for  "Gross receipts for section 448(c)" 

Here's the link to the 1120S K-1 instructions.  Refer to page 24.



Level 1

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.

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Level 15

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?

Level 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.  

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Level 1

Just one more comment - this code section is about the cash method of accounting.  If your shareholder is an individual, regardless of what he owns, his method of accounting is cash. 

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