PROBLEM 2 (25 POINTS) During 2016, McNulty Inc.’s income tax return showed taxab

ID: 2593643 • Letter: P

Question

PROBLEM 2 (25 POINTS) During 2016, McNulty Inc.’s income tax return showed taxable income of $154,446. The corporation also had the following items during the year: 1) Paid $83,056 in federal corporate income tax this year. 2) Paid $16,037 in non-deductible fines and penalties. 3) Received a refund on its 2013 tax return of $47,015. 4) The dividends received deduction on the 2016 tax return amounted to $55,380. 5) Received $620,771 in life insurance proceeds as a result of the death of the corporation’s vice president. 6) Excess capital losses this year amounted to $158,026. 7) Related party losses amounted to $24,540 8) Interest received on New York City Municipal Bonds: $83,020 9) Excess charitable contributions not deductible in the current year amounted to $60,446. Required: Calculate McNulty Inc.’s Corporation’s Current E & P for 2016 PROBLEM 2 (25 POINTS) During 2016, McNulty Inc.’s income tax return showed taxable income of $154,446. The corporation also had the following items during the year: 1) Paid $83,056 in federal corporate income tax this year. 2) Paid $16,037 in non-deductible fines and penalties. 3) Received a refund on its 2013 tax return of $47,015. 4) The dividends received deduction on the 2016 tax return amounted to $55,380. 5) Received $620,771 in life insurance proceeds as a result of the death of the corporation’s vice president. 6) Excess capital losses this year amounted to $158,026. 7) Related party losses amounted to $24,540 8) Interest received on New York City Municipal Bonds: $83,020 9) Excess charitable contributions not deductible in the current year amounted to $60,446. Required: Calculate McNulty Inc.’s Corporation’s Current E & P for 2016 PROBLEM 2 (25 POINTS) During 2016, McNulty Inc.’s income tax return showed taxable income of $154,446. The corporation also had the following items during the year: 1) Paid $83,056 in federal corporate income tax this year. 2) Paid $16,037 in non-deductible fines and penalties. 3) Received a refund on its 2013 tax return of $47,015. 4) The dividends received deduction on the 2016 tax return amounted to $55,380. 5) Received $620,771 in life insurance proceeds as a result of the death of the corporation’s vice president. 6) Excess capital losses this year amounted to $158,026. 7) Related party losses amounted to $24,540 8) Interest received on New York City Municipal Bonds: $83,020 9) Excess charitable contributions not deductible in the current year amounted to $60,446. Required: Calculate McNulty Inc.’s Corporation’s Current E & P for 2016

Explanation / Answer

McNulty Inc's Corporation's Current E & P for 2016

Taxable Income for 2016

$154,446

Less: Federal corporate income tax this year

$83,056

Non deductiable fines & penalties

$16,037

Excess Capital losses

$158,026

Related party losses

$24,540

Excess Charitable Contribution

$60,446

Add: Tax return 2013 refund

$47,015

Dividend received deduction 2016

$55,380

Life insurance proceeds

$620,771

Interest on Newyork Municipal Bonds

$83,020

Current E & P

$618,527