Boatwright Corporation, a calendar year taxpayer, receives dividend income of $600,000 from a corporation in which it holds a 90% interest. Boatwright also receives interest income of $40,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct a public playground.) Boatwright borrowed funds to purchase the municipal bonds and pays $22,000 of interest on the loan. Excluding these items, Boatwright's taxable income is $983,000. Boatwright has $760,000 of accumulated E & P at the end of the prior year and it paid Federal income taxes of $208,400 during the year. Click here to view the Dividend Received Deduction Table. a. After these items are taken into account, Boatwright Corporation's taxable income is $ 983,000 Feedback Check My Work The Code does not explicitly define the term earnings and profits. Instead, a series of adju provide a measure of the corporation's economic income. Both cash basis and accrual bas determining E & P. b. If its beginning balance this year in accumulated E & P is $760,000, then Boatwright Corporation's accumulated E & P at the start of next year is $ 2,361,000 X. EXHIBIT 3.2 Dividends Received Deduction Percentage of Ownership by Corporate Shareholder Deduction Percentage 50% 65% Less than 20% 20% or more (but less than 80%) 80% or more* *The payor corporation must be a member of an affiliated group with the recipient corporation. 100%