S Corp AAA Interactive Simulator

Experience the principle of the 'AAA Shield' that protects shareholder tax-free distributions.

1. AAA Calculation Simulator

Enter the corporation's current operating data to see how the ending AAA balance changes. (Sample data is pre-filled.)

Beginning AAA Balance

AAA Increase Factors (+)

Ordinary Business Income

Separately Stated Income (e.g., Capital Gains)

Tax-Exempt Income (e.g., Muni Bonds) (No effect on AAA)

AAA Decrease Factors (-)

Expenses/Losses (e.g., Contributions)

Distribution Information

C Corp Earnings & Profits (E&P)

Cash Distribution to Shareholder

2. Calculation Summary

3. Distribution Tax Treatment Simulation

Shows how the entered distribution () is taxed based on AAA and E&P.

Learn the Core AAA Rules

• Ordinary Business Income
• Net Rental Income
• Interest and Dividend Income
• Capital Gains
• Important: Tax-exempt income does not increase AAA.

Decreases are applied in the following order:

1. Ordinary business loss and separately stated loss/deduction items (e.g., capital loss, charitable contributions)
2. Nondeductible expenses
3. Distributions to shareholders (only to the extent of the AAA balance)
4. Important: AAA can be negative due to losses, but not due to distributions.

AAA is a corporate-level account that tracks the cumulative total of previously taxed profits. In contrast, Stock Basis is a shareholder-level account representing the shareholder's investment. The biggest difference is the treatment of 'tax-exempt income.' Tax-exempt income does not increase AAA, but it does increase a shareholder's stock basis. This difference affects the total amount a shareholder can withdraw tax-free.

This information is for educational purposes and is not tax or legal advice.

Please consult with a qualified professional for accurate tax planning.