Class 6d Corp E&P

Class 6d Corp E&P - Taxation of the Business Entity...

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Unformatted text preview: Taxation of the Business Entity Online Lecture Series Presented by Akore Berliner, CPA E&P and Corporate Distributions Earnings & Profits Determines if corporate distributions are treated as Dividends or as Return of Capital Corporation's economic ability to pay dividends without impairing capital No definition of E & P in Code Similar to Retained Earnings but often not the same Taxable Dividends 1. Distributions from corporate earnings and profits (E & P) Treated as a dividend distribution  Taxed as ordinary income or as preferentially taxed dividend income 1. Distributions in excess of E & P Nontaxable to extent of shareholders basis (i.e., a return of capital) 1. Excess distribution over basis is capital gain Calculating Earnings & Profits Calculation generally begins with taxable income , plus or minus certain adjustments Add previously excluded items and certain deductions to taxable income including:  Muni bond interest  Excluded life insurance proceeds  Federal income tax refunds  Dividends received deduction  Domestic production activities deduction Subtract certain nondeductible items:  Related-party losses  Expenses incurred to produce tax-exempt income  Federal income taxes paid  Key employee life insurance premiums (in excess of increase in cash surrender value)  Fines, penalties, and lobbying expenses Calculating Earnings & Profits Certain E & P adjustments shift effect of transaction from the year of inclusion in or deduction from taxable income to year of economic effect, such as: Charitable contribution carryovers NOL carryovers Capital loss carryovers Gains and losses from property transactions Generally affect E & P only to extent recognized for tax purposes Thus, gains and losses deferred under the like-kind exchange provision and deferred involuntary conversion gains do not affect E & P until recognized Calculating Earnings & Profits Other adjustments Accounting methods for E & P are generally more conservative than for taxable income, for example:  Installment method is not permitted...
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This note was uploaded on 08/11/2011 for the course ACCT 103 taught by Professor Huxhold during the Spring '11 term at San Diego.

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Class 6d Corp E&P - Taxation of the Business Entity...

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