A capital loss allocated to a shareholder always reduces the accumulated adjustments account.

Question

Quizplus · Accepted Answer

This is true. When a corporation distributes a capital loss to its shareholders, it reduces their accumulated adjustments account (AAA). The AAA is a record of the corporation's retained earnings, and it reflects the amount of its earnings that have not been distributed as dividends or used to reduce its stock's value. By reducing the AAA, the corporation is decreasing the amount of untaxed earnings that it has accumulated over time.

A Capital Loss Allocated to a Shareholder Always Reduces the Accumulated