Need Profits?

[Guest gkaley]

The ESOP Answer Book states that an employer must show profits/earnings in order to have dividends be deductible. However, there is no reference to guidance. Any help?

[RLL]

Hi gkaley ---

In order to be deductible under IRC section 404(k), the payment must be a "dividend" under IRC Subchapter C. Accordingly, it must be paid out of current or accumulated "earnings and profits." Also, it must be a dividend under applicable corporate law.

[Guest gkaley]

Thanks again, RLL!