Reference no: EM131774713
Problem - Beach Corporation, an accrual basis taxpayer, reports the following results for the current year:
Income:
Gross profit from manufacturing operations $250,000
Dividends received from 25%-owned domestic corporation 20,000
Interest income: Corporate bonds 10,000
Municipal bonds 12,000
Proceeds from life insurance policy on key employee 100,000
Section 1231 gain on sale of land 8,000
Expenses:
Administrative expenses 110,000
Bad debt 5,000
Depreciation:
Financial accounting 68,000
Taxable income 86,000
Alternative depreciation system (for E&P) 42,000
NOL carryover 40,000
Charitable contributions: Current year 8,000
Carryover from last year 3,500
Capital loss on sale of stock 1,200
U.S. production activities deduction 1,500
Penalty on late payment of federal taxes 450
a. What is Beach's taxable income?
b. What is Beach's current E&P?