S-Corp distribution & AAA Accumulated Adjustments Account

• AAA is an S-Corps retained earnings not yet distributed.

• income increases AAA

• distributions lowers AAA (but not below zero)

• capital contributions does not increase AAA

Scenario:

I invest $100k in S-Corp. S-Corp net profits $150k. My basis is now $250k. I distribute $200k to myself.

M-2 would look like this: https://i.stack.imgur.com/Nzv7d.jpg

question:

It would appear I now have $0 retained earnings which is false. I still have $50k retained earnings. What is wrong here?