Company X has a deficit of $20,000 in accumulated earnings and profits at the beginning of...

  

 

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Company X has a deficit of $20,000 in accumulated earnings and profits at the beginning of Year 2, has earnings and profits of $10,000 during Year 2, and distributes $10,000 on July 1 of Year 2. Under § 316(a)(2), the Year 2 distribution is a taxable dividend, notwithstanding X's deficit. How do you calculate the year 2 distribution and taxable dividend? Company X has a deficit of $20,000 in accumulated earnings and profits at the beginning of Year 2, has earnings and profits of $10,000 during Year 2, and distributes $10,000 on July 1 of Year 2. Under § 316(a)(2), the Year 2 distribution is a taxable dividend, notwithstanding X's deficit. How do you calculate the year 2 distribution and taxable dividend?

Answer rating: 100% (QA)

Under 316a2 of the Internal Revenue Code IRC if a corporation has a deficit in accumulated earnings ... View the full answer