11. LO.2 Compute current E & P for Sparrow Corporation (a calendar year, accrual basis taxpayer). Sparrow reported the following transactions during 2021, its second year of operation.

Taxable income $330,000 Federal income tax liability paid 69,300 Tax-exempt interest income 5,000 Business meal 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 2020 25,000 Dividends received from domestic corporations (less than 20% owned) 35,000 • Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by $10,000 during 2021.
• Sparrow sold some property on installments during 2020. The property was sold for $40,000 and had an adjusted basis then of $32,000. During 2021, Sparrow received a $15,000 payment on the installment sale.