problem $38at$ the end $of$ chapter $19$ after the reading content

Problem $38at$ the end $of$ Chapter $19$ after the reading content: This problem requires you $to$ make adjustments $toa$

corporation's taxable income $to$ compute the corporation's Current Earnings and Profits $(E$&$P).$ Use the format shown $in$

Example $9of$ Chapter $19to$ present your work. Please $be$ sure $to$ label your work and show all calculations for the

opportunity $to$ earn partial credit.

$LO.2$ Sparrow Corporation $(a$ calendar year, accrual basis taxpayer$)$ had the following

transactions $in2023,$ its second year $of$ operation:

Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased

$by$ $$10,000$ during $2023.In$ addition, Sparrow sold property $on$ installment during

The property was sold for $$40,000$ and had $an$ adjusted basis $at$ sale $of$ $$32,000.$

During $2023,$ Sparrow received $a$ $$15,000$ payment $on$ the installment sale. Finally;

assume that $no$ additional first$-$year depreciation was claimed. Compute Sparrow's

current $E$ & $P.$

Example $9$

Crimson Corporation $(a$ calendar year, accrual basis taxpayer$)$ reports taxable income $of$

$$429,000in2023.In$ addition, $it$ provides the following information:

Crimson sold property $on$ installment during $2021.$ The property was sold for $$120,000$

and had $an$ $$84,000$ adjusted basis when sold. During $2023,$ Crimson received $a$ $$30,000$

payment $on$ the installment sale. Finally, assume that Crimson did not claim any $179$

expense $or$ bonus depreciation $in2023.$ What $is$ Crimson's current $E$ & $P?$

How would your answer change $if$ Crimson told you that the $$82,000$ MACRS cost

recovery deduction was entirely $a179$ expense election?

For $E$ & $P$ purposes, the $$82,000$$$17920\%$ per

year$80\%of$ the $$82,000$$$65,600$ $$606,760($$$559,160+$$$65,600-$$$18,000).$ Over each $of$ the next four taxable

years, Crimson would have $a$ $$16,400$ current $E$ & $P$ deduction $to$ account for the $179$

expense taken $in2023$ for regular tax purposes $($$$82,00020\%).$