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COD in Sub S - the Sub S is insolvent. Should it be treated as an income item, or is it an "adjustment to shareholder equity" on line 25? How to enter in Pro Series

brian4
Level 2

The Sub S is insolvent and the shareholder is also insolvent.  We are removing the liability and adding the COD to Adjustments to Shareholder Equity, line 25, which brings the return into balance.  Is this the correct way to treat the COD since it should be non taxable.

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sjrcpa
Level 15

I'd do an M-1 for income reported on books not on tax return.


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3 Comments 3
sjrcpa
Level 15

I'd do an M-1 for income reported on books not on tax return.


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brian4
Level 2
Thank you!!
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sjrcpa
Level 15
You're welcome.

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