Question

Abbot Corporation reported a net operating loss of $510,000 in 20X3, which the corporation elected to carryforward to 20X4. Included in the computation of the taxable loss was regular depreciation of $210,000 (E&P depreciation is $40,000), first year expensing under §179 of $61,000, and a dividends received deduction of $11,100. The corporation's current earnings and profits for 20X3 would be:

Answer 1

Current earnings and profits = 739900

Step-by-step explanation:

we have given that

net operating loss = $510,000

depreciation = $210,000

E&P depreciation is $40,000

so Excess Depreciation is $210,000 - $40,000

Excess Depreciation is $170,000

received deduction of $11,100

Excess first year expensing under §179 = $61,000 -
`(61000)/(5)`

Excess first year expensing under §179 = $48800

because we know here that §179 First year expensing must be capitalized and amortized over 5 years

so here Current earnings and profits for20X3 is

Current earnings and profits = $510,000 + $170,000 + $11,100 + $48800

Current earnings and profits = 739900