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9. Rose Corporation (a calendar year taxpayer) has taxable income of $300,000, and its financial records reflect the followin
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Answer #1

To calculate Rose corporation's current Earnings & Profit, the federal income taxes paid will be subtracted from the taxable income . Then we will add the net operating loss carryforward and gain recognized this year on an installment sale from a prior year will be subtracted. The excess of depreciation deducted on tax return over ADS dep would be added and interest income on Iowa state bonds will also be added.

So Rose Corporation's current E & P = Taxable income - Federal income + Net operating loss carryforward - Gain recognised this year on previous year installment sale + (Depreciation-ADS Depreciation) + Interest income

Current E & P = $300,000- $110,000 + $70,000- $44,000+ (40,000-$10,000)+ $8,000 = $254,000

Correct option is (a) $254,000

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