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Prentice Hall’s Federal Taxation, Ch. 4
Students, when considering how much to pay out in dividends, companies use financial information. One option is to compute earnings and profits, which is specific calculation different than what is presented in the financial statements. Can you discuss how to compute earnings and profits (E&P)? What income is deferred to a later year when computing taxable income but is included in E&P in the current year? What deductions are allowed for taxable income purposes but denied for E&P?
Students, let's discuss distributions and terminations. What is the difference between liquidating and nonliquidating distributions? How are gains and losses booked? Also, discuss voluntary and involuntary termination of an S corporation.
Students, let's discuss partnerships. Discuss Basis and why it is important to understand.