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Current E & P

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Although I prepare taxes, I do not prepare corporate or partnership returns. I am taking this program so that I can learn how to do so. Unfortunately, the professors at this university are not helpful. They fail to realize that graduate school is still a learning experience.

Please see the attached PDF. I am finding a lot of errors in my text and I think I may have found another. According to my calculations, the current Earnings and Profits (E & P) would be (-8130). Please confirm or explain. Additionally, please explain the underlined statement.

Thanks.

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Solution Summary

This solution includes a detailed explanation calculating the amount of current E&P for Cote's Corporation.

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No, the text is correct. The accumulated E&P is a negative 10950. Since accumulated E&P is more than the distribution, the distribution becomes taxable. The pro rata portion of the current E&P is 30 x 181 days, which is 5430. The 3570 is then left after taking out the dividend and the current E&P from the beginning E&P on July 1. This brings it to a zero balance for the ...

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