Under no circumstances can a distribution generate (or add to)a deficit in E & P.

Question

Quizplus · Accepted Answer

This statement is true. According to the Internal Revenue Code, a corporation is prohibited from making any distributions that would generate or add to a deficit in its accumulated earnings and profits (E&P) account. If a corporation has negative E&P, it cannot make any distributions until it has sufficient earnings and profits to cover the distribution.

Under No Circumstances Can a Distribution Generate (Or Add To)a