How to Allocate E&P to Multiple Distributions (U.S. Corporate Tax)

When a company has positive current E&P and positive accumulated E&P, any distributions are a dividend to the extent of current E&P (and then accumulated E&P). But when there are multiple distributions during the year, and the total amount of the distributions exceeds the current E&P, you must allocate E&P to the various distributions as follows:
Step 1
Prorate current E&P to each distribution using this formula:
current E&P * (amount of the distribution / total distributions) = current E&P allocated to the distribution
Step 2
Apply accumulated E&P to distributions in chronological order (i.e., start with the distribution that occurred earliest during the tax year)-
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[@lauriedaugherty1511]

Thank you so much!! I was pulling my hair out trying to understand this until I found your great video!! Now I have no hair but at least I understand how to allocate E&P to multiple distributions!! :)

[@longtimegaming1080p]

How is Current E&P reduced by $60,000 if the distribution was made on June 30th? Isn't current E&P accumulated ratably throughout the year which mean current E&P would be reduced by only 50% or $40,000, followed by the full $100,000 in accumulated E&P and the remainder would be a return of capital?

[@AlawnHockey]

Per Rev. Rul. 74-164 you only apply the current e&p proportionally to your accumulated e&p when your current e&p is negative and your accumulated e&p is positive. You subtract proportionally from your accumulated e&p the amount the negative current e&p is at the time of the distribution.

[@DoughertyFarmsCT]

Question- if you are paying a dividend out in June and you don’t realize at the time that there will be multiple distributions, how would you know to use the formula?

[@Honestcritic79]

All these calculations are done at the end of the year.