Inca Company reports current E&P of negative $100,000 in 20X3 and accumulated E&P at the beginning of the year of $200,000. Inca distributed $300,000 to its sole shareholder on January 1, 20X3. How much of the distribution is treated as a dividend in 20X3?

Question

Quizplus · Accepted Answer

The distribution is treated as a dividend to the extent of accumulated E&P at the beginning of the year, which is $200,000. The negative current E&P does not affect the dividend treatment for the distribution made at the beginning of the year.

Inca Company Reports Current E&P of Negative $100,000 in 20X3