Accumulated E&P

Technical topics regarding tax preparation.
#1
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Can a Corp have a negative accumulated E&P?

I understand the current E&P gets reduced to 0, but does accumulate E&P go below 0?

I was under the impression the accumulated E&P goes to 0, and then any distributions are a return of capital up until basis.

But can losses create a deficit?
 

#2
Big E  
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And distributions in excess of basis are capital gain income
 

#3
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Correct.

But can deficits reduce accumulated E&P below 0?
 

#4
lckent  
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Yes. Google "Earnings and profits computation practice guide" for one of the easier to read articles on computation of E&P.
CPA, Retired
 

#5
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Thanks,

I have reviewed several examples, but of course, none of them have a deficit in E&P.

I just wanted to confirm it was possible.
 

#6
lckent  
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If you read the guide, you will find there are references about what to do if your company has positive current E&P, but a deficit in accumulated E&P carrying forward.
CPA, Retired
 


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