Greenwich Corporation reported a net operating loss of $800,000 in 20X3, which the corporation elected to carry forward 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-year charitable contribution of $10,000 that will be carried forward to 20X4. The corporation's current E&P for 20X3 would be:
A)($250,000).
B)($260,000).
C)($300,000).
D)($360,000).

Question

Quizplus · Accepted Answer

To calculate the corporation's current Earnings and Profits (E&P) for 20X3, we start with the net operating loss of $800,000. We then make adjustments for items that are treated differently for E&P purposes:1. Add back the disallowed fine of $50,000, because while it's not deductible for taxable income, it doesn't reduce E&P.2. Exclude the life insurance proceeds of $500,000, because life insurance proceeds are not included in E&P.3. The charitable contribution of $10,000 is not relevant for the current E&P calculation since it's a carryforward item and doesn't adjust the current year's E&P.Therefore, the calculation is: -$800,000 (net operating loss) + $50,000 (disallowed fine) = -$750,000. Since the life insurance proceeds do not affect E&P and the charitable contribution is not considered in this calculation, the correct answer is not directly provided by the adjustments mentioned. However, given the options and the adjustments specified, there seems to be a misunderstanding in the explanation process, as none of the adjustments lead directly to the options provided. Given the information and typical adjustments for E&P:- Starting with a -$800,000 loss.- Adding back the $50,000 fine.- Life insurance proceeds and charitable contributions typically have specific treatments for E&P, but based on the information provided, we should focus on adjustments mentioned.The correct calculation should consider all adjustments relevant to E&P, but with the given adjustments, there seems to be a discrepancy in reaching the exact figures provided in the options. The explanation aimed to follow the logic of adjustments for E&P but may not align perfectly with the options due to a misunderstanding of the application of life insurance proceeds and charitable contributions in this context.

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