Question

Gator Inc. reported taxable income of $1,000,000 this year and paid federal income taxes of $210,000. Included in the company’s computation of taxable income is gain from the sale of a depreciable asset of $50,000. The income tax basis of the asset was $100,000. The E&P basis of the asset using the alternative depreciation system was $175,000. Compute the company’s current E&P.

Answer 1

$715,000

Step-by-step explanation:

Taxable income$1,000,000

Subtract:Federal income taxes($210,000)

Regular tax gain from sale of asset ($150,000 – $100,000) ( 50,000)

E&P loss from sale of asset ($150,000 – $175,000)( 25,000)

Current E& P $715,000