Which of the following statements about earnings and profits (E&P) is false?
A. | A corporation can make taxable dividend distributions if it has current E&P, notwithstanding the fact that it may have a deficit in accumulated E&P. | ||
B. | A dividend is defined as paid out of either current or accumulated E&P. | ||
C. | E&P consists of two basic parts: current E&P and accumulated E&P. | ||
D. | The presumption is that every distribution is first made out of accumulated E&P and then from current E&P. |
Options | Reason | True/False |
A | If current E& P is positive ,a corporation can pay taxable dividend even if it has deficit accumulated E & P. (It is ignored) | True |
B | dividend can be paid out of either current E&P or accumulated E &P to consitute a taxable dividend any excess payment will be treated as return on capital | True |
C | E&P can be current or accumulated | True |
D | Dividend is first paid out of current E& P and then excess payment up to accumulated E& P is made in chronological manner | False. |
correct option is "d"
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