PPP loans - Spidell

PPP loans

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Message Board PPP loans

  • This topic has 1 reply, 2 voices, and was last updated 1 week ago by Kristen Jones.
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    • #301790
      Kenneth Clark
      Participant

      I have a Sub-S Corp client who applied for and received a PPP loan for $46,000.  The loan was not forgiven until 2021.  I have the following questions:  Should I keep the loan on the balance sheet as a long term liability and keep the PPP loan as other income?   But what about the $46,000 of expenses that were paid in 2020?   Do I reduce them since the loan was not forgiven until 2021?

      For California, I cannot use the newly approved AB 80 changes since the corporation actually made more income each respective quarter in 2020 than in 2019.  I must therefore reduce the expenses for California which means the P&L will go up by $46,000?    I use Lacerte.  Is there an easy way to show all these changes?       Thank you for any assistance.

      Ken Clark

    • #301803
      Kristen Jones
      Participant

      Hi Kenneth – Based on the guidance from the IRS that the “forgiveness is not taxable, and the expenses are deductible” (federally) we are considering it “book income not on tax return” as an M1 adjustment, that DOES affect AAA/Basis.  You have to Debit the B/S debt and Credit the P/L other income to clear it off the books.  They have stated that you make the adjustment in 2020 if you have a “reasonable expectation of forgiveness” even if it was not forgiven until 2021.

      As for CA it was pretty tricky when I was treating the expenses as “not deductible” on the CA return originally. We are still treating it as “other income”.   I have clients that are also still in this predicament with their income up for 2020.   We use UltraTax and I had to write up 4 steps to get it to property book the “income” in CA.  1. The M1 adjustment should only flow to AAA and not K1, 2. add to CA Adjustments other addition to get on the front of the 100S, 3. M1 adjustment other reduction to reverse what we did on Federal 4. Added ordinary income adjustment on my shareholder allocation to get it on Schedule CA K1.  Again, that is for UT.

      Result was increase to income on CA 100S and CA K1 for shareholder.  Both Federal and CA basis were increased per the US Treasury guidance.

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