[Code of Federal Regulations]
[Title 26, Volume 9]
[Revised as of April 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.852-5]

[Page 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 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.