I have a client who is an S Corp. I am preparing Sch M-2 that has a beginning balance (line 1) of 19k. The income for the year (line 2) is 4.6k. The total is approx. 20k. The distributions for the year based on the cash activity is $3,276, leaving a balance of $17k. The AAA balance, should be $3,276 (cash). I believe it is over stated (should be $3,276) because the distributions in prior years were not taken on line Schedule M, line 7 in prior year. Can we the prior year distributions on line 7 (distributions)?