[Code of Federal Regulations]
[Title 26, Volume 9]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.852-5]

[Page 24-25]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec.  1.852-5  Earnings and profits of a regulated investment company.

    (a) Any regulated investment company, whether or not such company 
meets the requirements of section 852(a) and paragraphs (a)(1) (i) and 
(ii) of Sec.  1.852-1, shall apply paragraph (b) of this section in 
computing its earnings and profits for a taxable year beginning after 
February 28, 1958. However, for a taxable year of a regulated investment 
company beginning before March 1, 1958, paragraph (b) of this section 
shall apply only if the regulated investment company meets the 
requirements of section 852(a) and paragraphs (a)(1) (i) and (ii) of 
Sec.  1.852-1.
    (b) In the determination of the earnings and profits of a regulated 
investment company, section 852(c) provides that such earnings and 
profits for any taxable year (but not the accumulated

[[Page 25]]

earnings and profits) shall not be reduced by any amount which is not 
allowable as a deduction in computing its taxable income for the taxable 
year. Thus, if a corporation would have had earnings and profits of 
$500,000 for the taxable year except for the fact that it had a net 
capital loss of $100,000, which amount was not deductible in determining 
its taxable income, its earnings and profits for that year if it is a 
regulated investment company would be $500,000. If the regulated 
investment company had no accumulated earnings and profits at the 
beginning of the taxable year, in determining its accumulated earnings 
and profits as of the beginning of the following taxable year, the 
earnings and profits for the taxable year to be considered in such 
computation would amount to $400,000 assuming that there had been no 
distribution from such earnings and profits. If distributions had been 
made in the taxable year in the amount of the earnings and profits then 
available for distribution, $500,000, the corporation would have as of 
the beginning of the following taxable year neither accumulated earnings 
and profits nor a deficit in accumulated earnings and profits, and would 
begin such year with its paid-in capital reduced by $100,000, an amount 
equal to the excess of the $500,000 distributed over the $400,000 
accumulated earnings and profits which would otherwise have been carried 
into the following taxable year.