Corporate nonliquidating

318 family attribution rules can be waived for purposes of the Sec.302(b)(3) complete termination rules even though the redeeming shareholder is a creditor of the corporation.11) A partial liquidation of a corporation is treated as a dividend in the case of a corporate shareholder.12) Two corporations are considered to be brother-sister corporations for purposes of the Sec.Finally, treatment of constructive dividends and qualified dividends will be explored.[MUSIC] Earnings & Profits, or E&P as it's known in practice, refers to a Subchapter C corporation's economic ability to pay dividends to its shareholders without encroaching its capital.

Thus, an adjustment is made for any deferred gain for property sales made during the year under the installment method.

First, earnings and profits (E&P) will be discussed, and you will learn how to calculate E&P.

Next, you will analyze the treatment of cash distributions followed by property distributions.

Increases to taxable income, decreases to taxable income, timing issues and accounting method issues. Because E&P aims to measure a corporation's economic ability to make a distribution without hindering its capital, it is necessary to increase taxable income by all income items that were excluded from taxable income.

For instance, the tax-exempt interest on municipal bonds, tax-exempt life insurance proceeds, and federal income tax refunds in prior years are economic income items that could be distributed to shareholders. Similarly, it is necessary to decrease taxable income by all expenses that were disallowed for one reason or another.

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