Dixon Corporation was incorporated on January 1, 2005. The corporation made its S election on April 1, 2008. The corporation retains an E&P balance from its C corporation days. Which one of the following current-year income and expense items is not included in Dixon Corporation's Accumulated Adjustments Account?

Question

Quizplus · Accepted Answer

Tax-exempt bond interest income is not included in the Accumulated Adjustments Account (AAA) because it is not subject to federal income tax. The AAA is used to track the corporation's taxable income and expenses to determine whether distributions to shareholders are tax-free returns of capital or taxable dividends. Ordinary income or loss, long-term capital gains and losses, and amortization of organizational expenditures are all included in the AAA.

Dixon Corporation Was Incorporated on January 1, 2005