Maui Corporation makes two distributions during the current tax year-the first for $20,000 on February 1 and the second for $30,000 on August 1.Before consideration of the distributions, the corporation has $18,000 in current earnings and profits and $21,000 of accumulated earnings and profits.How much of the second distribution is taxable as a dividend?

Question

Quizplus · Accepted Answer

The total earnings and profits available are $39,000 ($18,000 current + $21,000 accumulated). The first distribution of $20,000 is fully covered by the earnings and profits, leaving $19,000 available for the second distribution. Therefore, $19,000 of the second distribution is taxable as a dividend.

Maui Corporation Makes Two Distributions During the Current Tax Year-The