Madison Corporation reported taxable income of $400,000 in year 2 and accrued federal income taxes of $136,000. Included in the computation was regular depreciation of $200,000 (E&P depreciation is $60,000), first year expensing under §179 of $100,000, and a net capital loss carryover of $20,000 from year 1. The corporation's current earnings and profits for year 2 would be:

Question

Quizplus · Accepted Answer

$400,000 - $136,000 + $140,000 + $80,000 + $20,000 = $504,000. The first year expensing under §179 must be capitalized and amortized over 5 years ($20,000 per year).

Madison Corporation Reported Taxable Income of $400,000 in Year 2