Income Exclusions/Non-recognition Gross Income Non-special deductions Taxable Income (TI) before special deductions Charitable deduction: = lesser

ser of (i) 10% of ATI* or (ii) actual contribution] TI before DRD DRD: = lesser of (i) __% x Dividend (full DRD)** or (ii) __% x TI before DRD TI before NOL NOL: = lesser of (i) NOL or (ii) TI before NOL TI before QPAD QPAD: = 9% x lesser of (i) QPAI or (ii) TI before QPAD Taxable Income
*ATI = taxable income before special deductions minus any NOL carryforward **unless the full DRD results in a loss, then you deduct the full DRD [in a case where there are both 80% and 70% dividends, you deduct the 80% DRD first, then calculate the DRD for 70% after you reduce TI before DRD by the full amount of the 80% Dividend

NOL a corporations deductions exceed its gross income for the year

Taxable income Plus: Income excluded from taxable income but included in E&P tax-exempt interest proceeds from a life insurance contract in which the corporation is named as the beneficiary recoveries of bad debts and other deductions from which the corporation received no tax benefit federal income tax refunds from prior years Plus: Plus or minus: Income and deduction items that must be recomputed for E&P purposes income on long-term contracts must be based on the percentage of completion rather than the completed contract method depreciation on personal and real property must be based on: the straight-line method for other than MACRS property the alternative depreciation system for MACRS property excess of percentage depletion over cost depletion Plus: Deductions that are allowed for taxable income purposes but denied for E&P purposes dividends-received deduction NOL carryovers, charitable contribution carryovers, and capital loss carryovers applied in the current year U.S. production activities deduction Minus: Expenses and losses that are denied for taxable income purposes but allowed for E&P purposes federal income taxes premiums on life insurance contracts in which the corporation is named as the beneficiary excess capital losses that are not currently deductible excess charitable contributions that are not currently deductible expenses related to the production of tax-exempt income nondeductible losses on sales to related parties nondeductible penalties and fines nondeductible political contributions and lobbying expenses Current E&P balance (or deficit) Income deferred to a later year when computing taxable income but included in E&P in the current year deferred gain on installment sales. Such gain is included in E&P in the year of sale

Distribution return of anything of value to a shareholder in their capacity as a shareholder Dividend distribution out of E&P A distribution to the shareholder falls into one of three categories 1. Dividend to the extent of E&P 2. Reduction of paid-in-capital to the extent of outside basis (basis in the stock of the corp.) 3. Capital gain