Rose Corporation a calendar year taxpayer) has taxable income of $300,000, and its financial records reflect the following for the year.
$\begin{array}{lr}
\text { Federal income taxes paid } & \$ 110,000 \
\text { Net operating loss carryforward deducted currently } & 70,000 \
\text { Gain recognized this year on an installment sale from a prior year } & 44,000 \
\text { Depreciation deducted on tax return (ADS depreciation would have been } \$ 10,000) & 40,000 \
\text { Interest income on Iowa state bonds } & 8,000
\end{array}$
Rose Corporation’s current E & P is:

Question

Rose Corporation a calendar year taxpayer) has taxable income of $300,000, and its financial records reflect the following for the year. 
$\begin{array}{lr}
\text { Federal income taxes paid } & \$ 110,000 \
\text { Net operating loss carryforward deducted currently } & 70,000 \
\text { Gain recognized this year on an installment sale from a prior year } & 44,000 \
\text { Depreciation deducted on tax return (ADS depreciation would have been } \$ 10,000) & 40,000 \
\text { Interest income on Iowa state bonds } & 8,000
\end{array}$
Rose Corporation’s current E & P is:

Quizplus · Accepted Answer

Taxable income is increased by the net operating loss carryforward deducted currently and decreased by the gain recognized this year on an installment sale from a prior year. Depreciation is added back to taxable income because ADS depreciation is lower. Interest income on Iowa state bonds is not included in taxable income. Therefore, E & P is $300,000 + $70,000 - $44,000 + $10,000 = $254,000.

Rose Corporation a Calendar Year Taxpayer) Has Taxable Income of $300,000