N.H. Admin. Code § Rev 2402.03

Current through Register No. 45, November 7, 2024

Section Rev 2402.03 - Dividend Element

(a) The following transactions between a business enterprise and its owners shall be a dividend:

(1) Property transferred from a business enterprise to an owner with respect to the owner's ownership interest from the accumulated revenues and profits of the business enterprise as defined by RSA 77-E:1, I;

(2) Personal expenditures made by a business enterprise on behalf of an owner except those properly reported as compensation to the owner for federal income tax purposes;

(3) Forgiveness of an owner's indebtedness to the business enterprise unless the amount is:

a. Reported as compensation or interest to the individual for federal income tax purposes; and

b. Included in the compensation or interest elements of the business enterprise value tax base;

(4) Automatic re-investment of property deemed distributed to the owners from accumulated profits into additional stock of the business enterprise; or

(5) Imputed interest on a below market interest rate loan under IRC section 7872.

(b) When property, other than money, is distributed as a dividend, the computation of the dividend amount paid to the owner shall be measured by the property's fair market value determined as of the date of the distribution.

(c) All distributions by a business enterprise to its owners shall be presumed to be made sequentially from:

(1) The current year profits of the business enterprise;

(2) The accumulated revenues and profits of the business enterprise; and

(3) The capital of the business enterprise.

(d) Distributions made by "S" corporations shall be a dividend to be included in the dividend element when the distribution is from:

(1) The accumulated adjustment account or the previously taxed income categories; and

(2) Earnings and profits of the corporation accumulated prior to the "S" corporation election being made.

(e) An "S" corporation shall treat an item of income or expense under federal income tax provisions in arriving at the accumulated revenues and profits of the business enterprise, in a manner consistent with that of the "C" corporation.

(f) For corporate business enterprises, other than "S" corporations, the current earnings and profits of the business enterprise shall be determined as they are for federal income tax purposes.

(g) The accumulated revenues and profits of a non-corporate business enterprise shall be the total undistributed net income from all business activities since the inception of operations.

(h) Any undistributed net income retained by the business enterprise and considered capital for federal income tax purposes shall not be considered as such for purposes of the business enterprise tax.

(i) Amounts deducted under RSA 77-A:4, III, for the personal services of the proprietor or partners shall:

(1) Be a deduction in determining the net income from business activities; and

(2) Not be included in the dividend element.

(j) Distributions made by a business enterprise in liquidation or in complete redemption of an owner's interest in the business enterprise shall not be considered as a dividend for business enterprise tax purposes.

(k) Amounts included in the compensation element under Rev 2402.01(a)(6), net earnings from self-employment shall not be included in the dividend element.

N.H. Admin. Code § Rev 2402.03

INTERIM #5708, eff 9-23-93, EXPIRED: 1-21-94; ss by #5774, eff 1-21-94; ss by #7178, eff 12-23-99, EXPIRED: 12-23-07

New. #9065, eff 1-10-08

Amended by Volume XXXVI Number 06, Filed February 11, 2016, Proposed by #11032, Effective 1/29/2016, Expires 1/29/2026.