R owns 100 percent of F Corporation.In computing earnings and profits, artificial deductions such as the dividends-received deduction are not allowed.Capital losses, including a loss on the sale of property to R, however, are considered true economic losses and reduce earnings and profits even though such losses are not deductible in computing taxable income.

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Capital losses, including a loss on the sale of property to R, are considered true economic losses and reduce earnings and profits even though such losses are not deductible in computing taxable income. Artificial deductions such as the dividends-received deduction are not allowed in computing earnings and profits.

R Owns 100 Percent of F Corporation