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Rakhi Vasavada
Rakhi Vasavada , Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4420
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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S Corporation restricted stock awards vest 1/1/2014. Can the

Resolved Question:

S Corporation restricted stock awards vest 1/1/2014. Can the AAA account be debited to zero and liabilities created for shareholders as of 12/31/2013.
Submitted: 3 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 3 years ago.

Rakhi Vasavada :

Dear Friend,

Rakhi Vasavada :

Hello and welcome. Thank you for using Just Answer. Kindly remain online while I prepare a reply for you.

Rakhi Vasavada :

YES....AAA account CAN be debited to zero and liabilities be created as you mention in your question.The corporation's AAA can be reduced below zero, in which case the AAA must be restored to a positive amount before taxable distributions from accumulated earnings and profits can be avoided. The AAA, however, cannot be reduced below zero by distributions.

Rakhi Vasavada :

The following is an excellent reference for you...

Rakhi Vasavada :

http://taxhub.net/Accumulated-Adjustments-Account-(AAA).html

Rakhi Vasavada :

Are you there? Do you see my replies ?

Customer:

Yes. I really appreciate the answer! I'm a CPA with my own S corporation and we just put in the RSA plan. I discovered that the new shareholders will have access to the AAA when their shares vest, and my coowner and I have not taken alot out so AAA is pretty high. I don't have enough cash to pay it all and that's why I wanted the liability. I will follow the reference you gave.

Rakhi Vasavada :

Also refer the link I provided... that is an elaborative reference.

Rakhi Vasavada :

Elaborative

Rakhi Vasavada :

Is there anything more I can assist you with?

Customer:

No thank you very much for being available and willing to answer the question.

Rakhi Vasavada :

You are most welcome. It was pleasure working with you.

Rakhi Vasavada :

I am sure this would help.

You may please leave a positive rating if this helps as that is the only way we receive credit for assisting you. Alternatively feel absolutely free to revert with more queries if you have.

Warm Regards...

Rakhi Vasavada and 2 other Finance Specialists are ready to help you
Customer: replied 3 years ago.

Rakhi - I am reading through the reference you provided. When the AAA is reduced and the liability is received, I assume that for tax purposes that is constructive receipt on the part of the shareholder? If so then I assume gain would be due on any amount exceeding basis?

Expert:  Rakhi Vasavada replied 3 years ago.
Dear Claire,

That .. that is absolutely correct. You have got it right. You have also got it correct that the gain would be due on any amount exceeding the basis.

I am sure this would help.

You may please leave a positive rating if this helps as that is the only way we receive credit for assisting you. Alternatively feel absolutely free to revert with more queries if you have.

Warm Regards...
Customer: replied 3 years ago.

Sorry I didn't mean to say the liability is received.. I meant to say that when the liability is created but no cash is received, it is still constructive receipt?

Expert:  Rakhi Vasavada replied 3 years ago.
Dear Claire,

Yes.. I had understood it. It still remains a constructive receipt.

I am sure this would help.

You may please leave a positive rating if this helps as that is the only way we receive credit for assisting you. Alternatively feel absolutely free to revert with more queries if you have.

Warm Regards...
Rakhi Vasavada and 2 other Finance Specialists are ready to help you