Distributions in excess of a corporation's current and accumulated earnings and profits are treated as a nontaxable recovery of capital unless they exceed the basis of the stock.

Question

Quizplus · Accepted Answer

Distributions exceeding earnings and profits are considered a return of capital and are nontaxable until they surpass the shareholder's basis in the stock, at which point they are taxed as capital gains.

Distributions in Excess of a Corporation's Current and Accumulated Earnings