### Question
How does ITEMS NOT DEDUCTIBLE define projected earnings?


### Answer
Under *26 U.S.C. § 279*, **projected earnings** is defined as:

> the "average annual earnings" (as defined in subparagraph (B)) of—



(i) the issuing corporation only, if clause (ii) does not apply, or



(ii) both the issuing corporation and the acquired corporation, in any case where the issuing corporation has acquired control (as defined in section 368(c)), or has acquired substantially all of the properties, of the acquired corporation

#### Citation:
  - *26 U.S.C. § 279*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter B-Computation of Taxable Income > PART IX-ITEMS NOT DEDUCTIBLE**

