Sparrow Corporation ( a calendar year, accrual basis taxpayer ) had the following transactions in 2 0 2 4 , its second year of operation Taxable income $ 3 3 0 , 0 0 0 Federal income tax liability paid 6 9 , 3 0 0 Tax exempt interest income 5 , 0 0 0 Business meals expense ( total ) 3 , 0 0 0 Premiums paid on key employee life insurance 3 , 5 0 0 Increase in cash surrender value attributable to life insurance premiums 7 0 0 Proceeds from key employee life insurance policy 1 3 0 , 0 0 0 Cash surrender value of life insurance policy at distribution 2 0 , 0 0 0 Excess of capital losses over capital gains 1 3 , 0 0 0 MACRS deduction 2 6 , 0 0 0 Straight line depreciation using ADS lives 1 6 , 0 0 0 Section 1 7 9 expense elected in 2 0 2 3 2 5 , 0 0 0 Dividends received from domestic corporations ( less than 2 0 owned ) 3 5 , 0 0 0 Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by $ 1 0 , 0 0 0 during 2 0 2 4 In addition, Sparrow sold property on installment during 2 0 2 3 The property was sold for $ 4 0 , 0 0 0 and had an adjusted basis at sale of $ 3 2 , 0 0 0 During 2 0 2 4 , Sparrow received a $ 1 5 , 0 0 0 payment on the installment sale Finally, assume that no additional first year depreciation was claimed Click here for the Dividend Received Deduction Table Indicate whether each item ( or part of the item ) is Added to , Deducted from taxable income, or No effect when computing current E P Federal income tax liability paid Deducted Tax exempt interest income Added Non deductible meals and entertainment expenses Deducted Life insurance premiums paid, net of increase in cash surrender value Deducted Proceeds from life insurance policy, net of cash surrender value Added Excess of capital losses over capital gains Deducted Excess MACRS deduction Added Section 1 7 9 expense elected in 2 0 2 3 Deducted Dividends received deduction from domestic corporations Added LIFO adjustment Added Installment sale Deducted In your computations, if required, round amounts to the nearest dollar Sparrow Corporation's current E P is $

Question

Sparrow Corporation ( a calendar year, accrual basis taxpayer ) had the following transactions in 2 0 2 4 , its second year of operation  Taxable income $ 3 3 0 , 0 0 0 Federal income tax liability paid 6 9 , 3 0 0 Tax   exempt interest income 5 , 0 0 0 Business meals expense ( total ) 3 , 0 0 0 Premiums paid on key employee life insurance 3 , 5 0 0 Increase in cash surrender value attributable to life insurance premiums 7 0 0 Proceeds from key employee life insurance policy 1 3 0 , 0 0 0 Cash surrender value of life insurance policy at distribution 2 0 , 0 0 0 Excess of capital losses over capital gains 1 3 , 0 0 0 MACRS deduction 2 6 , 0 0 0 Straight   line depreciation using ADS lives 1 6 , 0 0 0 Section 1 7 9 expense elected in 2 0 2 3 2 5 , 0 0 0 Dividends received from domestic corporations ( less than 2 0   owned ) 3 5 , 0 0 0 Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by $ 1 0 , 0 0 0 during 2 0 2 4   In addition, Sparrow sold property on installment during 2 0 2 3   The property was sold for $ 4 0 , 0 0 0 and had an adjusted basis at sale of $ 3 2 , 0 0 0   During 2 0 2 4 , Sparrow received a $ 1 5 , 0 0 0 payment on the installment sale  Finally, assume that no additional first   year depreciation was claimed  Click here for the Dividend Received Deduction Table  Indicate whether each item ( or part of the item ) is  Added  to ,  Deducted  from taxable income, or   No effect  when computing current E   P   Federal income tax liability paid Deducted Tax   exempt interest income Added Non   deductible meals and entertainment expenses Deducted Life insurance premiums paid, net of increase in cash surrender value Deducted Proceeds from life insurance policy, net of cash surrender value Added Excess of capital losses over capital gains Deducted Excess MACRS deduction Added Section 1 7 9 expense elected in 2 0 2 3 Deducted Dividends received deduction from domestic corporations Added LIFO adjustment Added Installment sale Deducted In your computations, if required, round amounts to the nearest dollar  Sparrow Corporation's current E   P is $

Accepted Answer

To compute the current Earnings Profits EP for Sparrow Corporation well need to assess how each of the given items affects the taxable income when computing the current EP Here are the detailed steps ...

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Sparrow Corporation ( a calendar year, accrual basis taxpayer ) had the following transactions in 2 0 2 4 , its second year of operation:

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