Example. At the beginning of the calendar year 1955, Corporation M had $12,000 in earnings and profits accumulated since February 28, 1913. Its earnings and profits for 1955 amounted to $30,000. During the year it made quarterly cash distributions of $15,000 each. Of each of the four distributions made, $7,500 (that portion of $15,000 which the amount of $30,000, the total earnings and profits of the taxable year, bears to $60,000, the total distributions made during the year) was paid out of the earnings and profits of the taxable year; and of the first and second distributions, $7,500 and $4,500, respectively, were paid out of the earnings and profits accumulated after February 28, 1913, and before the taxable year, as follows:
Distributions during 1955 | Portion out of earnings and profits of the taxable year | Portion out of earnings accumulated since Feb. 28, 1913, and before the taxable year | Taxable amt. of each distribution | |
Date | Amount | |||
March 10 | $15,000 | $7,500 | $7,500 | $15,000 |
June 10 | 15,000 | 7,500 | 4,500 | 12,000 |
September 10 | 15,000 | 7,500 | 7,500 | |
December 10 | 15,000 | 7,500 | 7,500 | |
Total amount taxable as dividends | 42,000 |
26 C.F.R. §1.316-2