In the current year, Carnation Corporation has a § 179 expense of $40,000.As a result, in the current year, taxable income must be increased by $32,000 to determine current E & P.

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This statement is true. Section 179 expense is a tax deduction that allows businesses to deduct the full purchase price of qualifying equipment and/or software that was purchased or financed during the tax year. However, the deduction is limited to a certain amount each year. In this case, the § 179 expense is $40,000, which means that Carnation Corporation can deduct up to $40,000 of the cost of qualifying equipment or software from its taxable income. Since the deduction reduces taxable income, an adjustment must be made to add back the amount of the § 179 expense to calculate current E & P. So, taxable income must be increased by $32,000 (i.e., $40,000 § 179 expense minus $8,000 of allowable deduction) to determine current E & P.

In the Current Year, Carnation Corporation Has a § 179