Compute current E & P for Sparrow Corporation (a calendar year, accrual basis taxpayer). Sparrow reported the

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Compute current E & P for Sparrow Corporation (a calendar year, accrual basis taxpayer). Sparrow reported the following transactions during 2017, its second year of operation.
Taxable income ..................................................................... $330,000
Federal income tax liability paid ................................................... 112,000
Tax-exempt interest income ........................................................... 5,000
Meals and entertainment expenses (total) ........................................... 3,000
Premiums paid on key employee life insurance .................................... 3,500
Increase in cash surrender value attributable to life insurance premiums .......... 700
Proceeds from key employee life insurance policy .............................. 130,000
Cash surrender value of life insurance policy at distribution ..................... 20,000
Excess of capital losses over capital gains ......................................... $ 13,000
MACRS deduction ...................................................................... 26,000
Straight-line depreciation using ADS lives ........................................... 16,000
Section 179 expense elected during 2016 ............................................. 25,000
Dividends received from domestic corporations (less than 20% owned) ......... 25,000
‰ Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by $10,000 during 2017.
‰ Sparrow sold some property on installments during 2016. The property was sold for $40,000 and had an adjusted basis then of $32,000. During 2017, Sparrow received a $15,000 payment on the installment sale?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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South Western Federal Taxation 2018 Essentials Of Taxation Individuals And Business Entities

ISBN: 9781337386173

21st Edition

Authors: William A. Raabe, James C. Young, Annette Nellen, David M. Maloney

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