The AAA begins with a zero balance on the first day of an S corporation's first tax year.

Question

Quizplus · Accepted Answer

The Accumulated Adjustments Account (AAA) in an S corporation starts with a zero balance at the beginning of the corporation's first tax year because it represents the accumulated adjustments to the corporation's income, gains, losses, and deductions throughout its existence as an S corporation, and there would be no adjustments prior to the first tax year.

The AAA Begins with a Zero Balance on the First