Show your calculations, reference all relevant citations, and explain your answer.

Use a flat corporate rate of 21% for all problems. Use an individual tax rate of 28%, and an individual capital gains rate of 15%. Assume that all dividends are qualified dividends.

Assume there is no Alternative Minimum Tax for these problems.

Assume that all entities are US domestic corporations, taxed under Subchapter C of the IRC unless otherwise noted.

Problem 3.1 – Earnings and Profits

Plant Corporation has the following items of income and expense for the 20x8 tax year:

Gross Receipts $200,000
§162 (Deductible Operating) Expenses $100,000
Dividends Received (from 10% Owned Corporation) $ 10,000
Interest Received on State Bonds $ 20,000
Book Gain on 1/1/20x8 Installment Sale $100,000
(Total installments receipts = $1,000,000
Current Year Receipts = $200,000,
Installment Agreement is for 5 Years)
Capital Loss $ 5,000
Penalties $ 2,000

1. Calculate Plant Corporation’s earnings and profits for 20x8.