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The earnings and profits of a corporation for income tax purposes are the same as the retained earnings for 11. corporate financial accounting purposes. In 2010, Supreme Corporation has accumulated earnings and profits of $5,000 and current earnings and 12. profits of $10,000. The corporation distributes $10,000 cash to 50 percent Individual Shareholder A, and property with an adjusted basis of $2,000 and a fair market value of $10,000 to 50 percent Corporate Shareholder B. Both of the shareholders will report a taxable dividend of $10,000. The accumulated earnings penalty tax can be avoided if the corporation promptly pays a dividend upon the 13. determination of a deficiency by the IRS.