Rose Corporation (a calendar year taxpayer) has taxable income of $300,000, and its financial records reflect the following for the year
Federal income taxes paid $110,000
Net operating loss carryforward deducted currently 70,000
Gain recognized this year on an installment sale from a prior year 44,000
Depreciation deducted on tax return (ADS depreciation would have been $10,000) 40,000
Interest income on Iowa state bonds 8,000
Rose Corporation's current E & P is:
a. $254,000.
b. $214,000.
c. $194,000.
d. $104,000.
e. None of the above.
a
RATIONALE: To determine E & P, the Federal income tax is subtracted from taxable income and the net operating loss carryforward is added. The gain recognized currently from the prior year's installment sale is subtracted. The excess of depreciation deducted on the tax return over ADS depreciation and the interest from Iowa state bonds are added.
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