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Jon Andrews
Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
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Experience:  I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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Can I take districution from capital, therefore reduce the

Resolved Question:

Can I take districution from capital, therefore reduce the "Capital stock" on balance sheet?
I had taken distribution more than retained earning last year, therefore the balance sheet is not balanced since the "Cash" is decreased. When I started out the company a few years ago, the "Capital stock" on balance sheet was told to put in a huge number. Now I want to take some money from the company, would like to know if I can reduce the "Capital stock" to a smaller number. Thanks
Submitted: 4 years ago.
Category: Tax
Expert:  Jon Andrews replied 4 years ago.

There is no need to reduce the capital stock account. If you have taken distributions in excess of retained earnings, the retained earnings account will be negative.

 

jon

Customer: replied 4 years ago.
I am using Turbo Tax, and it doesn't go negative on Retained Earning for excessive distribution. Beside, the "Cash" is much lower the "Capital Stock" now. Any suggestion?
Expert:  Jon Andrews replied 4 years ago.

I do not use Turbo Tax so I cannot tell you specifically what to do with that software, but there has to be a way - negative retained earnings is not uncommon. Turbo Tax support indicates that retained earnings can be negative. See this link http://turbotax.intuit.com/support/kb/general-program-issues/entering-your-data/740.html.

 

My guess is that there is a box to check or an interview question to answer that will allow this to happen properly.

 

jon

Customer: replied 4 years ago.
So it is ok that "Capital Stock" is less than "Cash" on balance sheet? What if I really want to reduce the number for "Capital Stock"?
Expert:  Jon Andrews replied 4 years ago.

It is quite normal for capital stock to be less than cash. Capital stock is a defined number - number of shares outstanding times par value per share. There is no negative or positive impact on anything based on the capital stock amount. You can make it $0, $1,000, or $1,000,000 and it will not have any tax impact whatsoever. So, if you want to change it, go ahead.

 

jon

Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience: I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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