Greg Corporation,an accrual method taxpayer,had accumulated earnings and profits of $300,000 as of December 31,last year.For its current tax year,Greg's books and records reflect the following: Based on the above,what is the amount of Greg Corporation's current earnings and profits for this year?

Question

Greg Corporation,an accrual method taxpayer,had accumulated earnings and profits of $300,000 as of December 31,last year.For its current tax year,Greg's books and records reflect the following:  Based on the above,what is the amount of Greg Corporation's current earnings and profits for this year?

Quizplus · Accepted Answer

The calculation of Greg Corporation's current earnings and profits for this year is as follows:

Beginning balance of accumulated earnings and profits = $300,000

Plus: Current year's taxable income = $120,000

Minus: Non-deductible expenses (meals and entertainment) = $2,500

Minus: Capital loss (which cannot reduce earnings and profits) = $1,000

Minus: Dividend paid = $293,000

Total = $123,500

Since earnings and profits are calculated to the nearest $500, the final amount is rounded up to $124,500, which is option C.

Greg Corporation,an Accrual Method Taxpayer,had Accumulated Earnings and Profits of $300,000