Question: Sparrow Corporation (a calendar year, accrual basis taxpayer) had the follows transactions in 2015, its second
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Sparrow Corporation (a calendar year, accrual basis taxpayer) had the follows transactions in 2015, its second year of operation.
Taxable income | $330,000 | |
Federal income tax liability paid | 112,000 | |
Tax-exempt interest income | 5,000 | |
Meal and entertainment expenses (total) | 3,000 | |
Premiums paid on key employee life insurance | 3,500 | |
Increase in cash surrender value attributable to life insurance premiums | 700 | |
Proceeds from key employee life insurance policy | 130,000 | |
Cash surrender value of life insurance policy at distribution | 20,000 | |
Excess of capital losses over capital gains | 13,000 | |
MACRS deduction | 26,000 | |
Straight-line depreciation using ADS lives | 16,000 | |
Section 179 expense elected during 2014 | 25,000 | |
Dividends received from domestic corporation (less than 20% owned) | 25,000 |
Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by $10,000 during 2015. In addition, Sparrow sold property on installment during 2014. The property was sold for $40,000 and had an adjusted basis at sale of $32,000. During 2015, 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.
Related Book For
South Western Federal Taxation 2016 Corporations Partnerships Estates and Trusts
ISBN: 9781305399884
39th edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young
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