Grand River Corporation reported taxable income of $600,000 in 20X3 and paid federal income taxes of $204,000. Not included in the computation was a disallowed meals and entertainment expense of $2,200, tax-exempt income of $1,200, and deferred gain on a current-year transaction treated as an installment sale of $26,000. The corporation's current E&P for 20X3 would be:

Question

Quizplus · Accepted Answer

The correct answer is A because the current E&P is calculated as taxable income plus tax-exempt income minus disallowed expenses and deferred gains. In this case, the current E&P is $600,000 + $1,200 - $2,200 - $26,000 = $421,000.

Grand River Corporation Reported Taxable Income of $600,000 in 20X3