Ohio Corporation, a calendar year taxpayer, has a beginning balance in accumulated E & P of $3.5 million and current earnings of $1 million. If Ohio can justify accumulations for the needs of the business of $4.1 million, its accumulated earnings credit for ATI purposes is:

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The accumulated earnings credit is the lesser of the current year's taxable income or the accumulated earnings and profits (E&P) balance that can be justified as necessary for the needs of the business. Ohio Corporation has a beginning balance of $3.5 million in accumulated E&P and current earnings of $1 million, for a total of $4.5 million. However, they can only justify accumulations for the needs of the business of $4.1 million. Therefore, the accumulated earnings credit is $4.1 million, which is the lesser of the two amounts.

Ohio Corporation, a Calendar Year Taxpayer, Has a Beginning Balance