TAX-EXEMPT INTEREST FROM STATE MUNICIPALITY BONDS

Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • #2841444
    Lola23
    Participant

    I have a question where you have to compute the distribution to accumulated earnings and profits when E&P has been exhausted. The questions gives you the accumulated earnings and profits which is $200,000.
    It says that the Corp has $300,000 of gross income, $280,000 of expenses from ordinary business operations and also has $10,000 of tax-exempt state municipality bonds. This information is to calculate the E&P.

    I didn't contemplate in my calculation the $10,000 of tax-exempt interest ($300,000-$280,000) because of the exclusion for tax purposes. But the correct answer says that I have to include it for the calculation ($300,000-$280,000+$10,000).

    I'm still confuse as the tax-exempt interest in this question. Why it is included in the calculation if is tax exempt? Let me know your feedback. Thank you.

    #2841459
    aaronmoaaronmo
    Participant

    Read this:

    https://www.investopedia.com/terms/a/accumulatedearningsandprofits.asp

    https://www.thetaxadviser.com/issues/2013/oct/kaiser-oct2013.html

    I think you'll understand afterwards. E&P is relevant to shareholders and distributions to shareholders.

    AUD - 96
    BEC - 84
    FAR - 89
    REG - 86
    Aaron and always remember, YMMV

    I profit from your CPE frustration. You're welcome.

    #2841636
    Lola23
    Participant

    I get it. Thank you for sharing those references.

Viewing 3 posts - 1 through 3 (of 3 total)
  • You must be logged in to reply to this topic.


TRY NINJA FREE FOR 7 DAYS

INCLUDES:

  1. Free NINJA Study Framework
  2. Free NINJA Study Planner
  3. Free NINJA Notes
  4. Free NINJA Audio
  5. NINJA MCQ & SIMS (Full Version!)
  6. Plus 5 Other NINJA Weapons

GET YOUR INSTANT ACCESS NOW:

* All fields are required.