Current through Register Vol. 42, No. 11, August 30, 2024
01Alabama Accumulated Adjustments Account.
(1) The Alabama Accumulated Adjustments
Account.
(a) The Alabama Accumulated
Adjustments Account (AAAA) is an account maintained for an Alabama S
corporation which details the amounts of earnings, profits, losses, gains and
deductions which have been previously included by the individual shareholders
on their respective income tax returns. It is used to compute the tax effect of
distributions made by Alabama S corporations which have accumulated earnings
and profits.
(b) For tax years
beginning after December 31, 1990, and before January 1, 1997, the adjustments
to the Alabama Accumulated Adjustments Account included:
1. The amounts of earnings, profits, losses,
gains and deductions attributed to Alabama and includible by the nonresident
shareholders on their respective returns, and
2. The entire amounts of earnings, profits,
losses, gains and deductions includible by the Alabama resident shareholders on
their respective returns.
(c) For tax years beginning on or after
January 1, 1997, the adjustments to the Alabama Accumulated Adjustments Account
include the entire earnings, profits, losses, gains and deductions of the S
corporation to the extent includible by the individual shareholders on their
respective returns.
1. If an item of income is
subject to allocation and apportionment, the adjustment is an amount that is in
proportion to the amount of the income reportable on the shareholder's return
bears to the amount of income allocated and apportioned to Alabama and required
to be included in the shareholder's return.
(2) Adjustments to the Alabama Accumulated
Adjustments Account. The AAAA is equal to zero on the first day of the first
year the corporation is an Alabama S corporation.
(a) The balance of the account is increased
by the following amounts:
1. Any separately
stated income, except exempt income (as defined in §
40-18-14,
Code of Ala. 1975), as computed under §
40-18-162(a)(1),
Code of Ala. 1975,
2. Any nonseparately stated income, except
exempt income as defined in §
40-18-14,
as computed under §
40-18-162(a)(2),
and
3. Any oil and gas depletion
deduction in excess of the basis of the wells being depleted.
(b) The balance of the account is
decreased by the following amounts:
1. Any
separately stated loss and deductions, as computed under §
40-18-162(a)(1),
2. Any nonseparately stated loss and
deductions, as computed under §
40-18-162(a)(2),
3. Any deduction for oil and gas depletion to
the extent such deduction does not exceed the proportionate share of the
adjusted basis of such property allocated to the shareholder, and
4. Any distribution of the type described in
Rule
810-3-165-.01,
subdivisions (1)(a) or (1)(b).
(c) For tax years beginning after December
31, 1996, in applying the rules of §
40-18-166 to distributions, the AAAA for the end of the taxable year will be determined
without regard to the net loss for the taxable year.
(3) AAAA Adjustment Upon Redemption of Stock.
If the Alabama S corporation redeems parts of its stock, the AAAA will be
decreased by an amount which bears the same ratio to the balance in such
account as the number of shares redeemed in such redemption bears to the total
number of shares of the S corporation issued and outstanding immediately before
the redemption. For example, if the S corporation should redeem one-half of its
stock, the AAAA would be reduced by one-half.
(4) Election Concerning Distribution
Treatment. An Alabama S corporation may, with the consent of all affected
shareholders, elect to have all distributions treated as distributions first
from the accumulated earnings and profits, rather than as distributions of
amounts from the AAAA. See Rule
810-3-165-.01(3).
(a) The term "affected shareholder" means any
shareholder who receives a distribution from the Alabama S corporation during
the taxable year of the corporation.
(b) The consent may be in any form which
clearly reflects the shareholder's election under §
40-18-166(b) to treat actual distributions as being first from accumulated earnings and
profits, rather than a tax-free distribution from the Alabama Accumulated
Adjustments Account, and must be notarized or otherwise authenticated before
some officer authorized to administer oaths.
(c) The consent must be attached to the
return (Form 20S) of the Alabama S corporation for the taxable year.
(d) This election and consent will not affect
the requirement under §
40-18-162 for the shareholder to include his or her prorata share of the corporation's
income, gains, losses and deductions attributed to Alabama in his or her
Alabama individual income tax return.
(5) In administering and interpreting this
regulation, the Department will consider administrative rulings and judicial
decisions in respect to the similar provisions of the Internal Revenue Code and
Regulations thereunder.
Authors: Jeffrey Taylor, Verlon Frost, Catherine
McCary, Ann Winborne, CPA, Charlotte Jordan, Ed Cutter, CPA
Statutory Authority: Code of Ala.
1975, §§
40-2A-7(a)(5),
40-18-166.
History: Adopted November 13, 1985. Filed July 22,
1992; October 30, 1992. Amended: Filed March 26, 1998; effective
April 30, 1998. Amended: Filed March 31, 2000, effective May 5,
2000.
