I'm looking at a target's tax return and I'm trying to calculate the correct amount of depreciation to add back for EBITDA. While this is typically straight forward, I'm a little confused by whats deductible on the entity return (1120S) vs the K-1 and how it would impact SBA underwriting.
Scenario: Service based business; depreciate assets are exclusively trucks/autos
Entity: Single member S-Corp. Owner (seller) gets receives the only K-1.
I'm looking at tax returns and I'm seeing a depreciation amount on page 1 of the entity return (1120S). Pretty straight forward that this amount is added back to the Ordinary Business Income. However, I'm only seeing the additional Section 179 bonus deduction on the K-1.
Since this impacts taxes (thus owner Cash Flow), should I be adding this back to my EBITDA calculation?
Similarly, I'm seeing different amounts for "Officer Compensation" on the 1120 and "W-2 Wages" on Schedule A of the 199a and I'm not sure why or how to think about the two.
Trying to wrap my head around these and I'd welcome any thoughts. Thanks!
EBITDA Calc --> Include Section 179 bonus depreciation?

by a searcher from University of Virginia
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