Assume that S corporation has earnings and profits, which of the following state

Question

Assume that S corporation has earnings and profits, which of the following statements is true?

A) The accumulted adjustments account is decreased by expenses related to tax exempt income

B) The accumulated adjustments account is decreased by federal taxes attributable to a C corporation year.

C) The accumulated adjustments account is decreased by the shareholders deduction for depletion from oil and gas property under IRC SECTION 613A(C) (11) (B)

D) The accumulatd adjustments acciunt is increased by tax-exempt income

Explanation / Answer

The option is A. i.e., The accumulated adjustments account is decreased by expenses related to tax exempt income.

In general Accumulated Adjustment account is a S corporation account. In order to decrease the accumulated adjustment account expenses related to income which is exempt from tax.

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