(1) the amount of money,
(2) the principal amount of the obligations of such corporation (or, in the case of obligations having original issue discount, the aggregate issue price of such obligations), and
(3) the adjusted basis of the other property, so distributed.
(1) the earnings and profits of the corporation shall be increased by the amount of such excess, and
(2) subsection (a)(3) shall be applied by substituting “fair market value” for “adjusted basis”.
(1) the amount of any liability to which the property distributed is subject, and
(2) the amount of any liability of the corporation assumed by a shareholder in connection with the distribution.
(1) In general
The distribution to a distributee by or on behalf of a corporation of its stock or securities, of stock or securities in another corporation, or of property, in a distribution to which this title applies, shall not be considered a distribution of the earnings and profits of any corporation—
(A) if no gain to such distributee from the receipt of such stock or securities, or property, was recognized under this title, or
(B) if the distribution was not subject to tax in the hands of such distributee by reason of .
(2) Stock or securities
For purposes of this subsection, the term “stock or securities” includes rights to acquire stock or securities.
(1) Effect on earnings and profits of gain or loss
The gain or loss realized from the sale or other disposition (after
(A) for the purpose of the computation of the earnings and profits of the corporation, shall (except as provided in subparagraph (B)) be determined by using as the adjusted basis the adjusted basis (under the law applicable to the year in which the sale or other disposition was made) for determining gain, except that no regard shall be had to the value of the property as of
(B) for purposes of the computation of the earnings and profits of the corporation for any period beginning after
Gain or loss so realized shall increase or decrease the earnings and profits to, but not beyond, the extent to which such a realized gain or loss was recognized in computing taxable income under the law applicable to the year in which such sale or disposition was made. Where, in determining the adjusted basis used in computing such realized gain or loss, the adjustment to the basis differs from the adjustment proper for the purpose of determining earnings and profits, then the latter adjustment shall be used in determining the increase or decrease above provided. For purposes of this subsection, a loss with respect to which a deduction is disallowed under section 1091 (relating to wash sales of stock or securities), or the corresponding provision of prior law, shall not be deemed to be recognized.
(2) Effect on earnings and profits of receipt of tax-free distributions
Where a corporation receives (after
(A) no such increase shall be made in respect of the part of such distribution which (under such law) is directly applied in reduction of the basis of the stock in respect of which the distribution was made; and
(B) no such increase shall be made if (under such law) the distribution causes the basis of the stock in respect of which the distribution was made to be allocated between such stock and the property received (or such basis would, but for , be so allocated).
(1) If any increase or decrease in the earnings and profits for any period beginning after
(2) If the application of subsection (f) to a sale or other disposition after
(1) Section 355
In the case of a distribution or exchange to which section 355 (or so much of section 356 as relates to section 355) applies, proper allocation with respect to the earnings and profits of the distributing corporation and the controlled corporation (or corporations) shall be made under regulations prescribed by the Secretary.
(2) Section 368(a)(1)(C) or (D)
In the case of a reorganization described in subparagraph (C) or (D) of , proper allocation with respect to the earnings and profits of the acquired corporation shall, under regulations prescribed by the Secretary, be made between the acquiring corporation and the acquired corporation (or any corporation which had control of the acquired corporation before the reorganization).
(1) there is outstanding a loan to such corporation which was made, guaranteed, or insured by the United States (or by any agency or instrumentality thereof), and
(2) the amount of such loan so outstanding exceeds the adjusted basis of the property constituting security for such loan,
(1) General rule
For purposes of computing the earnings and profits of a corporation for any taxable year beginning after
(2) Exception
If for any taxable year a method of depreciation was used by the taxpayer which the Secretary has determined results in a reasonable allowance under and which is the unit-of-production method or other method not expressed in a term of years, then the adjustment to earnings and profits for depreciation for such year shall be determined under the method so used (in lieu of the straight line method).
(3) Exception for tangible property
(A) In general
Except as provided in subparagraph (B), in the case of tangible property to which section 168 applies, the adjustment to earnings and profits for depreciation for any taxable year shall be determined under the alternative depreciation system (within the meaning of ).
(B) Treatment of amounts deductible under section 179, 179B, 179C, 179D, or 179E
(i) In general
For purposes of computing the earnings and profits of a corporation, except as provided in clause (ii), any amount deductible under section 179, 179B, 179C, 179D, or 179E shall be allowed as a deduction ratably over the period of 5 taxable years (beginning with the taxable year for which such amount is deductible under section 179, 179B, 179C, 179D, or 179E, as the case may be).
(ii) Special rule
In the case of a corporation that is a real estate investment trust, any amount deductible under section 179D shall be allowed in the year in which the property giving rise to such deduction is placed in service (or, in the case of energy efficient building retrofit property, the year in which the qualifying final certification is made).
(4) Certain foreign corporations
The provisions of paragraph (1) shall not apply in computing the earnings and profits of a foreign corporation for any taxable year for which less than 20 percent of the gross income from all sources of such corporation is derived from sources within the United States.
(5) Basis adjustment not taken into account
In computing the earnings and profits of a corporation for any taxable year, the allowance for depreciation (and amortization, if any) shall be computed without regard to any basis adjustment under .
(1) Does not increase earnings and profits if applied to reduce basis
The earnings and profits of a corporation shall not include income from the discharge of indebtedness to the extent of the amount applied to reduce basis under section 1017.
(2) Reduction of deficit in earnings and profits in certain cases
If—
(A) the interest of any shareholder of a corporation is terminated or extinguished in a title 11 or similar case (within the meaning of ), and
(B) there is a deficit in the earnings and profits of the corporation,
then such deficit shall be reduced by an amount equal to the paid-in capital which is allocable to the interest of the shareholder which is so terminated or extinguished.
The earnings and profits of any corporation shall not be decreased by any interest with respect to which a deduction is not or would not be allowable by reason of , unless at the time of issuance the issuer is a foreign corporation that is not a controlled foreign corporation (within the meaning of section 957) and the issuance did not have as a purpose the avoidance of of this subsection
(1) Construction period carrying charges
(A) In general
In the case of any amount paid or incurred for construction period carrying charges—
(i) no deduction shall be allowed with respect to such amount, and
(ii) the basis of the property with respect to which such charges are allocable shall be increased by such amount.
(B) Construction period carrying charges defined
For purposes of this paragraph, the term “construction period carrying charges” means all—
(i) interest paid or accrued on indebtedness incurred or continued to acquire, construct, or carry property,
(ii) property taxes, and
(iii) similar carrying charges,
(C) Construction period
The term “construction period” has the meaning given the term production period under .
(2) Intangible drilling costs and mineral exploration and development costs
(A) Intangible drilling costs
Any amount allowable as a deduction under section 263(c) in determining taxable income (other than costs incurred in connection with a nonproductive well)—
(i) shall be capitalized, and
(ii) shall be allowed as a deduction ratably over the 60-month period beginning with the month in which such amount was paid or incurred.
(B) Mineral exploration and development costs
Any amount allowable as a deduction under section 616(a) or 617 in determining taxable income—
(i) shall be capitalized, and
(ii) shall be allowed as a deduction ratably over the 120-month period beginning with the later of—
shall be allowed as a deduction ratably over the 120-month period beginning with the later of—
(I) the month in which production from the deposit begins, or
(II) the month in which such amount was paid or incurred.
(3) Certain amortization provisions not to apply
Sections 173 and 248 shall not apply.
(4) LIFO inventory adjustments
(A) In general
Earnings and profits shall be increased or decreased by the amount of any increase or decrease in the LIFO recapture amount as of the close of each taxable year; except that any decrease below the LIFO recapture amount as of the close of the taxable year preceding the 1st taxable year to which this paragraph applies to the taxpayer shall be taken into account only to the extent provided in regulations prescribed by the Secretary.
(B) LIFO recapture amount
For purposes of this paragraph, the term “LIFO recapture amount” means the amount (if any) by which—
(i) the inventory amount of the inventory assets under the first-in, first-out method authorized by section 471, exceeds
(ii) the inventory amount of such assets under the LIFO method.
(C) Definitions
For purposes of this paragraph—
(i) LIFO method
The term “LIFO method” means the method authorized by section 472 (relating to last-in, first-out inventories).
(ii) Inventory assets
The term “inventory assets” means stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year.
(iii) Inventory amount
(I) if the corporation uses the retail method of valuing inventories under section 472, by using such method, or
(II) if subclause (I) does not apply, by using cost or market, whichever is lower.
(5) Installment sales
In the case of any installment sale, earnings and profits shall be computed as if the corporation did not use the installment method.
(6) Completed contract method of accounting
In the case of a taxpayer who uses the completed contract method of accounting, earnings and profits shall be computed as if such taxpayer used the percentage of completion method of accounting.
(7) Redemptions
If a corporation distributes amounts in a redemption to which or 303 applies, the part of such distribution which is properly chargeable to earnings and profits shall be an amount which is not in excess of the ratable share of the earnings and profits of such corporation accumulated after
(8) Special rule for certain foreign corporations
In the case of a foreign corporation described in subsection (k)(4)—
(A) paragraphs (4) and (6) shall apply only in the case of taxable years beginning after
(B) paragraph (5) shall apply only in the case of taxable years beginning after
For purposes of subsection (a)(2), the terms “original issue discount” and “issue price” have the same respective meanings as when used in subpart A of part V of subchapter P of this chapter.