Water Corporation reports $500,000 of taxable income for the current year. The f

ID: 2372813 • Letter: W

Question

Water Corporation reports $500,000 of taxable income for the current year. The following additional information is available:

-for the current year, Water reports an $80,000 long-term capital loss and no capital gains.

-Taxable income includes $80,000 of dividends from a 10%-owned domestic corporation.

-Water paid fines and penalties for $6,000 that were not deducted in computing taxable income.

-in computing this year's taxable income, Water deducted a $20,000 NOL carryover from a prior tax year.

-Water claimed a $10,000 U.S. production activities deduction.

-Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed fro E&P purposes.

Assume a 34% corporate tax rate. What is Water's current E&P for this year?

.........................................wATER CORPORATION

PARTICULARS

Taxableincome...............................500000

capitalloss.......................................(80000)

Dividend recieved deduction.........56000

Fines..................................................(6000)

Net operating loss deduction........20000

US production activities deduction..10000

depriciation excess...........................40000

LESS:Income tax(500000 *0.34)....(170000)

E and P of current year.....................370000

hence the answer is 370000

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