common_E&P_adjustments

common_E&P_adjustments - Earnings and Profits...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Earnings and Profits (E&P) A. What is E&P (earning and profits)? 1. E&P represents the upper limit on the amount of dividend income a shareholder must recognize on corporate distributions it represents the corporation's economic income (i.e. their “economic ability” to pay dividends) without impairing its capital 2. E & P is computed on an annual basis at the end of the tax year (without reduction for any distributions made during the year) 3. E & P is NOT defined in the tax code – it is similar to retained earnings (a financial accounting concept) but it is not the same B. The formula to compute current E & P Taxable income (computed at end of tax year) + Additions to taxable income Subtractions from taxable income +/- Timing adjustments +/- Accounting method adjustments = Current E & P (current E & P deficit) C. Some common E&P adjustments A. Additions to taxable income 1. tax-exempt (muni-bond) interest 2. federal income tax refunds 3. excluded life insurance proceeds where corporation is beneficiary
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/04/2010 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.

Page1 / 2

common_E&P_adjustments - Earnings and Profits...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online