Assume taxable income is the starting point for computing E & P.During 2008, Moscow Corporation made a charitable contribu?tion of $100,000.Of this amount $10,000 could not be deducted in arriving at Moscow's taxable income for 2008 because of the 10% limitation.The $10,000 was carried over to 2009 and fully deducted in that year.

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Quizplus · Accepted Answer

The excess charitable contribution deduction of $10,000 would reduce Moscow Corporation's E & P in 2008. This is because E & P is calculated starting with taxable income, and the $10,000 excess deduction reduces taxable income in 2008. The fact that it was carried over and fully deducted in 2009 has no effect on E & P for that year.

Assume Taxable Income Is the Starting Point for Computing E