Question

Which of these items is not an adjustment to taxable income or net loss to compute current E&P?

a. Disallowed portion of meal expenditures.
b. Executive compensation.
c. Tax exempt life insurance proceeds.
d. Federal income taxes paid or accrued

Answer 1

The item that is not an adjustment to taxable income or net loss for computing current E&P is 'Federal income taxes paid or accrued'. Other options given are adjustments in the E&P computations.

Step-by-step explanation:

The question relates to the calculation of earnings and profits (E&P) for a corporation for tax purposes. The correct answer to the question is d. Federal income taxes paid or accrued. This is not an adjustment in computing current E&P because federal income taxes are not deductible when calculating E&P. The other items listed are adjustments: a. The disallowed portion of meal expenditures is added back to taxable income since they are only partially deductible for tax purposes; b. Excessive executive compensation can be an adjustment if it is not deductible for tax purposes; and c. Tax exempt life insurance proceeds are excluded from taxable income, but they are included in the computation of E&P.

Answer 2

d. Federal income taxes paid or accrued

Step-by-step explanation:

There are different items considered as a taxable income adjustment. The taxable income adjustment is usually computed by subtracting exemptions such as itemized or personal deductions from the adjusted gross income. However, a refund due to taxes conducted in the previous year is not one of the taxable income adjustment.