Distributable Net Income (DNI)

Distributable net income (DNI) is the amount of income that a corporation can distribute to its shareholders. It is calculated by taking the corporation's net income and subtracting any non-deductible expenses, such as interest, taxes, and depreciation. DNI is important because it determines how much money a corporation can pay out in dividends.

There are two types of DNI: current DNI and accumulated DNI. Current DNI is the amount of income that a corporation has earned in the current year. Accumulated DNI is the amount of income that a corporation has earned in previous years and has not yet been distributed to shareholders.

When a corporation distributes dividends, it must first use its current DNI. If the corporation does not have enough current DNI, it can use its accumulated DNI. However, a corporation cannot distribute more than its accumulated DNI.

DNI is also used to calculate the maximum amount of money that a corporation can contribute to its shareholders' equity accounts. This amount is known as the accumulated earnings and profits (AEP). AEP is the amount of money that a corporation has earned over its lifetime and has not been distributed to shareholders.

The calculation of DNI can be complex, and there are many different rules that apply. For example, different rules apply to corporations that are members of an affiliated group of corporations. If you are unsure how to calculate DNI, you should consult with a tax advisor.