Au Sable Corporation reported taxable income of $800,000 in year 2 and paid federal income taxes of $272,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from year 1 of $50,000. Au Sable is an accrual basis taxpayer. The corporation's current earnings and profits for year 2 would be:

Question

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$800,000 - $272,000 - $25,000 + $100,000 = $603,000. The refund is not added back because Au Sable is on the accrual method.

Au Sable Corporation Reported Taxable Income of $800,000 in Year