[Verse 1] When a corporation makes some cash Earnings and profits tell the tale Current year and past combined Help determine what's for sale Shareholders receive their share But how it's taxed depends on E and P Distribution rules apply Let's learn the code that sets us free [Chorus] Three oh one says check the order first Current E and P gets hit Then accumulated takes the rest That's how dividends commit Property distributions trigger gain At corporate level pain Remember E and P That's the dividend key [Verse 2] Sometimes dividends aren't declared But still they count as income flow Constructive dividends appear When benefits to shareholders show Excessive salary or loans Below market rent they pay Corporate benefits disguised As dividends they'll stay [Chorus] Three oh one says check the order first Current E and P gets hit Then accumulated takes the rest That's how dividends commit Property distributions trigger gain At corporate level pain Remember E and P That's the dividend key [Bridge] Stock dividends and stock rights too Section three oh five's the rule Generally not income to you Unless they change proportions cool Pro rata means you're safe Disproportionate means tax Stock distributions have their place Know the facts [Verse 3] When property gets distributed out Corporation must recognize The gain as if they sold it out At fair market value price Built-in gains can't hide away Corporate tax will have its day Shareholders get basis stepped Up to value kept [Chorus] Three oh one says check the order first Current E and P gets hit Then accumulated takes the rest That's how dividends commit Property distributions trigger gain At corporate level pain Remember E and P That's the dividend key [Outro] Distributions tell a story Current then accumulated glory E and P will guide the way In the tax code every day
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