Pheasant Corporation, a calendar year taxpayer, has taxable income of $600,000. Among its transactions for the...
Pheasant Corporation, a calendar year taxpayer, has taxable income of $600,000. Among its transactions for the year are the following:
| Collection of proceeds from insurance policy on life of corporate | |
| officer (in excess of cash surrender value) | $10,000 |
| Realized gain (not recognized) on an involuntary conversion | 5,000 |
| Nondeductible fines and penalties | 35,000 |
Disregarding any provision for Federal income taxes, Pheasant Corporation's current E & P is:
a.$575,000.
b.$600,000.
c.$580,000.
d.$650,000.
e.$565,000.
Homework Answers
Pheasant Corporation's current E & P is computed as shown below:
Taxable income + proceeds from the insurance policy on the life of the corporate officer (in excess of cash surrender value) - nondeductible fines and penalties
= $ 600,000 + $ 10,000 - $ 35,000
= $ 575,000
The realized gain (not recognized) on the involuntary conversion has no effect on E & P.
So the correct answer is option a i.e. $ 575,000
Feel free to ask in case of any query relating to this question
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