Abbot Corporation reported a net operating loss of $400,000 in year 1.Included in the year 1 taxable income computation were regular depreciation of $100,000 (E&P depreciation is $40,000), and a dividends received deduction of $15,000.The corporation's current earnings and profits for year 1 would be:
A)$(325,000).
B)$(340,000).
C)$(400,000).
D)$(355,000).

Question

Quizplus · Accepted Answer

To calculate current earnings and profits (E&P), start with the net operating loss of $400,000. Adjust for the difference in depreciation ($100,000 - $40,000 = $60,000) and add back the dividends received deduction of $15,000. So, E&P = -$400,000 + $60,000 + $15,000 = -$325,000.

Abbot Corporation Reported a Net Operating Loss of $400,000 in Year