LO.2 Willingham, Inc., an accrual basis C corporation, reports year 1 book and taxable income of $2 million, before accounting for its investment activities. The applicable tax rate is 35% for year 1 and thereafter. Compute Willingham’s year 1 current and deferred income tax expense.

The entity owns one investment asset, which it purchased many years ago for $1 million.

At the end of year 1, the asset’s fair value is $1.8 million. Willingham reports no other year 1 book-tax differences.