Hello and welcome to this chapter. In this chapter, we will cover current versus accumulated earnings and profits and how they are treated in corporate distributions, which are dividends. Let's start by looking at the difference between current and accumulated earnings and profits. Current earnings and profits refer to taxable income that has been adjusted. The adjustments can include additions or subtractions. If you have any doubts about the adjustments, please refer to the previous recording. On the other hand, accumulated earnings and profits (AE&P) refers to the total of all prior year's current earnings and profits since February 28, 1913. It is reduced by distribution from earnings and profits. We need to distinguish between current earnings and profit and accumulated earnings and profit. Current earnings and profit refer to earnings and profit for the current year, while accumulated earnings and profit come from previous years. The taxability of corporate distribution depends on how current and accumulated earnings and profit are allocated to each distribution made during the year. When we distribute profit, we need to know whether it is coming from AE&P or accumulated AE&P. There are certain situations we need to deal with in this session. These include having a positive current earnings and profit and a negative accumulated AE&P, a negative current earnings and profit and a positive accumulated AE&P, or both positive or negative. If we have a positive balance in both current and accumulated earnings and profit, distribution is assumed to be made first from the current earnings and profit, and anything extra is made from the accumulated earnings and profit. However, if the distribution exceeds the current earnings and profit, we need to allocate current and accumulated profit to each distribution. We allocate it pro-rata and then apply the accumulated earnings and profit in chronological order. To understand this better, let's...