I've been using Turbotax for business since 1998 to file the 1120S and have basically ignored the M-2 calculations, since I'm not required to fill the M-2 out. Now I'm going back to reconstruct since 1998 for my own understanding and to make sure it's correct. Each year the entries on Schedule K are very simple and recur every year. I'm the only shareholder.

My question is to confirm where the entries go on the M-2.

1. Each year I usually have a short term gain (Sch K line7). It's correct that this goes on the M-2 AAA column as an addition?

2. Each year I usually have a Section 179 deduction (Sch K line 11). It's correct that this goes on the M-2 AAA column as a reduction?

3. Here's the one I'm stuck on. Each year I have Nondeductible expenses for Meals/Entertainment (Sch K line 16c). Does this go on the M-2 as a reduction or an addition in the AAA column or the Other Adjustments column?

4. Is the AAA balance supposed to equal anything else on the return or does it change from year to year unrelated to any other number on the current tax year 1120S?

Thank you in advance!
David

After doing further research on my own questions I believe I found my answers. Perhaps someone can confirm. Thanks in advance.
Question 1 - Correct
Question 2 - Correct
Question 3 - Column AAA as a reduction
Question 4 - AAA balance does not match any other number on the current years return.