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Level 3
February 14, 2026
Question

Final corporate return - Reconcile pre-liquidation Retained Earnings per bal sheet with amount per Sch M-2

  • February 14, 2026
  • 1 reply
  • 10 views

I'm filing a final C-Corp tax return for 2025. The form instructions say to present on Schedule L the balance sheet prior to final distribution to shareholder. However, The actual distribution amount that was input and reported on Schedule M-2, to properly zero-out Retained Earnings on Schedule M-2, also zeroes out the Retained Earnings on Schedule L (which I don't want!)

The only way that I could find to present the correct pre-distribution balance sheet on Schedule L is to override ending Retained Earnings on Lacerte Form 38.  Problem is that this then causes Schedule M-2 to show an ending balance on Line 8, which it shouldn't, as it causes Schedule M-2 to be mathematically incorrect, since after subtracting the distribution the ending balance on Schedule M-2, Line 8 should be zero!

Lacerte was unable to help me with this problem at all.  I told them that I can't imaging that it's not a problem that many other practitioners have had over the years! 

Any ideas anyone???

 

1 reply

sjrcpa
Level 15
February 14, 2026

I never knew the instructions said that.

I always show a -0- ending Balance Sheet when there has been a liquidation.

CAGMC

The more I know the more I don’t know.
IRonMaN
Level 15
February 14, 2026

They have instructions for that?  Looks like I’ll be riding in the backseat of the copper car with you when they come to get us.

Slava Ukraini!