Cash distributions received from a corporation with a deficit balance in accumulated E & P at the beginning of the year will not be taxed as dividend income.

Question

Quizplus · Accepted Answer

Cash distributions received from a corporation with a deficit balance in accumulated E & P at the beginning of the year will be treated as dividend income to the extent of the current and prior year's earnings and profits. If the distribution exceeds that amount, it will be treated as a non-taxable return of capital or capital gain.

Cash Distributions Received from a Corporation with a Deficit Balance