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Which of the following statements best describes earnings and profits?

Which of the following statements best describes earnings and profits?


Earnings and profits is another name for a corporation's retained earnings on its balance sheet.



Earnings and profits is a precisely defined tax term in the Internal Revenue Code and represents a corporation's economic income.

Earnings and profits is a partially defined tax concept in the Internal Revenue Code and represents a corporation's economic income, subject to classification as a dividend if distributed to the stockholders.

Earnings and profits is a conceptual tax concept with no definition in the Internal Revenue Code.

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