Use of MACRS cost recovery when computing taxable income requires an E & P adjustment.

Question

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MACRS cost recovery is a method of depreciating assets for tax purposes. The amount of depreciation taken under MACRS can differ from the amount of depreciation calculated for financial accounting purposes. Therefore, an adjustment to earnings and profits (E&P) is required to ensure that there is no duplication of deductions or income. This adjustment is necessary to reconcile the differences between the tax and financial accounting methods of depreciation.

Use of MACRS Cost Recovery When Computing Taxable Income Requires