Computing Corporate Earnings and Profits

This course covers the Why, When, and How of computing Earnings and Profits (E&P).

• Why?  Distributions to shareholders are taxable to the extent of corporate E&P.
• When?  Ideally, a corporation should compute its E&P annually.
  • Presumption that distributions are taxable dividends can only be refuted through a computation of E&P.
• How?  There is no set formula for computing E&P.
  • Worksheet for computing current E&P included in the instructions to form 5452.