Form 5452 for Nondividend Distributions: Who Files, E&P, Attachments

Form 5452, the Corporate Report of Nondividend Distributions, is the schedule a C corporation attaches to its Form 1120 when it has paid distributions that exceed its current and accumulated earnings and profits. The form shows how each distribution breaks down between taxable dividend, tax-free return of capital, and any amount that pushes shareholders into capital gain. If the corporation skips the filing, the IRS can treat the whole distribution as a taxable dividend up to the corporation’s total earnings and profits.¹

Who Has to File

Any corporation that made a nondividend distribution during the calendar year has to file.¹ A distribution becomes a “nondividend distribution” to the extent it exceeds the corporation’s current and accumulated earnings and profits (E&P). That excess is not a dividend; it is a return of capital to the shareholder.

The trigger is tied to the calendar year the distributions were made, even if the corporation runs on a fiscal year.¹ In a consolidated group, the parent files on behalf of the subsidiary that made the distribution.

S corporations file in a much narrower set of circumstances: distributions under the post-termination transition rules of IRC 1371(e) or 1371(f), or in the year distributions fully exhaust accumulated E&P carried over from C corporation years.¹ Routine distributions out of an S corporation’s accumulated adjustments account alone do not require this form.

What the Form Is Actually Documenting

Form 5452 exists to carry out the ordering rules in IRC 301(c), which decide how a corporate distribution is taxed to the shareholder.² A distribution gets split in up to three pieces:

The portion coming out of current or accumulated E&P is a taxable dividend.
Whatever is left reduces the shareholder’s adjusted stock basis and is not taxed.
Any amount beyond the shareholder’s remaining basis is treated as gain from a sale of the stock.

That third tier catches people. The nondividend portion is only tax-free up to each shareholder’s basis; once basis hits zero, additional dollars are capital gain to the shareholder.² The shareholder reports that gain, but the corporation has to characterize the distribution correctly on Form 5452 and on Box 3 of Form 1099-DIV so shareholders know what they are receiving.³

Calculating Earnings and Profits

A “dividend” for federal tax purposes is any distribution made out of current or accumulated earnings and profits.⁴ E&P is not taxable income and it is not book retained earnings. It is a separate tax measure of the corporation’s economic ability to pay distributions, and the entire point of Form 5452 is to show your distributions outran that measure.

The computation starts with taxable income from Form 1120 and runs through a series of adjustments. Items that were real economic income but excluded from the tax return get added back. Tax-exempt interest is the classic example.⁵ The dividends-received deduction gets added back because the corporation actually received the full dividend. Life insurance proceeds payable to the corporation go the same way.

Expenses that drained cash but were not deductible come off E&P. Federal income taxes are the largest of these. Penalties and fines, lobbying expenses, and the nondeductible portion of business meals all reduce E&P as well.

Then there are timing differences. For depreciation on tangible property subject to MACRS, E&P uses the alternative depreciation system, generally straight-line over a longer recovery period than the accelerated method on the tax return. If you took bonus depreciation or MACRS acceleration on Form 1120, you reverse the difference for E&P. Installment sales recognize the full gain in the year of sale for E&P even though the tax return defers it.⁶ Organizational expenses may amortize on a different schedule for E&P than for tax.

Current E&P and accumulated E&P are tracked separately. Current E&P is the figure for the year in question. Accumulated E&P is the running total from prior years, net of prior distributions. Distributions are sourced first from current E&P, allocated pro rata across every distribution made during the year, then from accumulated E&P in chronological order. A distribution counts as a dividend to the extent of current E&P even when accumulated E&P sits at a deficit. If current E&P is negative, distributions are dividends only to the extent of accumulated E&P at each distribution date.⁴

Filling Out the Form

The form itself is a summary. Once the E&P work is done, you transfer results into six lettered sections after entering the corporation’s name and EIN.¹

Section A asks whether the corporation has filed Form 5452 for a prior calendar year, and if so, which years. Section B asks whether any of the distributions are part of a partial or complete liquidation; a yes answer requires an attached explanation. Section C applies only to S corporations with leftover C corporation E&P, asking whether any distributions come from the accumulated adjustments account. Section D is where you enter current and accumulated E&P from your computation worksheet.

Section E asks for the number of shareholders at the date of the last distribution, split into individuals, partnerships, and corporations or other entities.¹ The IRS uses this to cross-reference the 1099-DIVs issued.

Section F is the heart of the form. You report total distributions for the calendar year and break them into amounts paid from current-year E&P, accumulated E&P, and sources other than E&P. That last line is the nondividend, return-of-capital portion. Section F also requires the taxable and nontaxable percentages, calculated as the ratio of each source amount to total distributions. If 30% of total distributions came from sources other than E&P, 30% is the nontaxable percentage reported to every shareholder, and that percentage drives the 1099-DIV amounts. The percentage applies uniformly to each distribution during the year unless the corporation tracked interim E&P at each distribution date.¹

Property distributions require an additional statement showing both the tax basis and the fair market value of each distributed property.

Attachments You Must Include

The form is short; the attachments are not. The IRS requires:¹

A current-year E&P computation that reconciles taxable income to the final E&P figure and shows every adjustment.
A year-by-year accumulated E&P schedule, starting from the corporation’s origin, February 28, 1913, or the last year information was furnished to the IRS, whichever is latest.
A tax-basis balance sheet, required if the corporation completed Schedule L on Form 1120, reflecting E&P-related differences.
A reconciliation of depreciation if E&P depreciation differs from the amount deducted on Form 1120.
A detailed schedule of every distribution made during the calendar year, with dates and amounts.

Corporations with 12 or fewer shareholders attach copies of every Form 1099-DIV issued to those shareholders. Consolidated groups attach a schedule showing how the group’s tax liability was allocated among members and identify the allocation method.¹

The year-by-year accumulated E&P schedule is usually where the preparation time goes, especially for older corporations that have never filed the form before. Mergers, restructurings, and ownership changes can mean reconstructing decades of history. The instructions soften this by letting the schedule start from the last year information was furnished to the IRS rather than requiring a trip back to the founding date.

When and How to File

Form 5452 is not mailed on its own. You attach it to the corporation’s income tax return.¹ A calendar-year C corporation files it with Form 1120, due April 15 of the following year. A fiscal-year corporation attaches Form 5452 to the return for the first fiscal year that ends after the calendar year in which the distributions were made. Distributions in October 2025 by a June 30 fiscal-year corporation go with the Form 1120 for the fiscal year ending June 30, 2026, which is due October 15, 2026.

Missing the filing is costly. If Form 5452 is not filed, the IRS can treat the entire distribution as a taxable dividend up to the corporation’s total E&P.¹ That flips the burden onto the corporation to prove otherwise after the fact. Keep every book and record supporting the E&P calculation for as long as it bears on any open tax year.

1
Internal Revenue Service. Instructions for Form 5452
2
Office of the Law Revision Counsel. 26 USC 301 – Distributions of Property
3
Internal Revenue Service. Form 1099-DIV
4
Justia Law. 26 USC 316 – Dividend Defined
5
eCFR. 26 CFR 1.312-6 – Earnings and Profits
6
Office of the Law Revision Counsel. 26 USC 312 – Effect on Earnings and Profits