Accumulated profits govern deemed dividend treatment, with liquidation and amalgamation rules shaping what profits are included.

Accumulated profits are central to deemed dividend treatment, because a payment is taxable only to the extent of the company's accumulated profits. For a company not in liquidation, the profits up to the date of distribution or payment are included; for a company in liquidation, profits up to the date of liquidation are included, subject to the statutory exclusion for liquidation following compulsory acquisition. In amalgamation, the accumulated profits of the amalgamating company are added to those of the amalgamated company on the date of amalgamation.

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