Blanton Corporation had a deficit in its current earnings and profits of $36,500 for the current year. It has $75,000 in accumulated earnings and profits. The corporation made two distributions to its shareholders. On April 30, it distributed $40,000, and on November 30, it distributed $20,000.
When the corporation sends out its 1099-DIV forms to its shareholders, how much of the distribution will be taxable to the shareholders as dividends?© BrainMass Inc. brainmass.com June 3, 2020, 9:00 pm ad1c9bdddf
The current deficit is assumed to have been lost ratably over the year: $36500 / 365 = $100/day.
Assuming a calendar year corporation, the first distribution would be calculated as follows:
$40,000 dividend on April 30: $100/day x 120 days ...
The cited solution explains the concepts and includes detailed calculations to arrive at the answers. The calculations for the amount of dividends and return of capital are clearly noted.