For each of the following transactions, indicate whether a special adjustment must be made in computing R Corporation’s current E&P. Answer assuming that E&P has already been adjusted for current taxable income.

1. During the year, the corporation paid estimated Federal income taxes of $25,000 and estimated state income taxes of $10,000.
2. The corporation received $5,000 of interest income from its investment in tax-exempt bonds.
3. The corporation received a $10,000 dividend from General Motors Corporation.
4. The corporation purchased machinery for $9,000 and expensed the entire amount in accordance with Code § 179.
5. The corporation reported a § 1245 gain of $20,000. f. The corporation had a capital loss carryover of $7,000 from the previous year. This year the corporation had capital gains before consideration of the loss of $10,000

Answer rating: 100% (QA)

Answer Step 1 E P Is Earnings and Profit It is the measure of the ability of the corporation to make ... View the full answer