Common use of Previously taxed income Clause in Contracts

Previously taxed income. If a cor- poration to which paragraph (d)(2) of this section (relating to corporations with previously taxed income) applies makes the election provided in this paragraph (f)(2) for the taxable year, and does not make the election to fore- go previously taxed income under para- graph (f)(4) of this section, distribu- tions by the S corporation during the taxable year are treated as made first, from previously taxed income under paragraph (d)(2) of this section; second, from earnings and profits under section 1368(c)(2); and third, from the AAA under section 1368(c)(1). Any portion of a distribution remaining after the pre- viously taxed income, earnings and profits, and the AAA are exhausted is treated in the manner provided in sec- tion 1368(b).