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TaxGirl11
Level 3
March 19, 2025

Negitive AAA but shareholder has basis

  • March 19, 2025
  • 1 reply
  • 5 views

I have a new client that has negative AAA but has over $100,000 in shareholder basis for an S corp. Can they take a distribution if the AAA is negative without having to claim capital gain?  They have basis so I would think they could?

1 reply

sjrcpa
sjrcpa
Level 15
March 19, 2025

Yes they can take a distribution up to their basis. Keep in mind the ordering rules for losses, deductions and distributions. The distribution can't reduce an already negative AAA account.

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