Greenwich Corporation reported a net operating loss of $800,000 in 20X3, which the corporation elected to carryforward to 20X4. The computation of the loss did not include a disallowed fine of $50,000, life insurance proceeds of $500,000, and a current yearcharitable contribution of $10,000 that will be carried forward to 20X4. The corporation's current earnings and profits for 20X3 would be:

Question

Quizplus · Accepted Answer

To compute current earnings and profits, we start with taxable income and then make the following adjustments:
Additions:
- Life insurance proceeds: $500,000
Deductions:
- Disallowed fine: ($50,000)
- Charitable contribution carryforward: ($10,000)

Taxable income = $800,000 (loss) + $50,000 (disallowed fine) - $500,000 (life insurance) - $10,000 (charitable contribution carryforward) = ($660,000)

Current E&P = Taxable income + nondeductible expenses (life insurance) - non-taxable income (charitable contribution) = ($660,000) + $500,000 - $10,000 = ($170,000)

Therefore, the correct answer is B) ($360,000).

Greenwich Corporation Reported a Net Operating Loss of $800,000 in 20X3