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What is the current earnings and profits (E&P) of a corporation with taxable income of $10,000 that included the following unadjusted items: Meals $ 200 Capital loss carried over from prior year 3,000 A) $7,100 B) $10,000 C) $12,800 D) $12,900
What is the current earnings and profits (E&P) of a corporation with taxable income of $10,000 that included the following unadjusted items:
Meals $ 200
Capital loss carried over from prior year 3,000
A) $7,100
B) $10,000
C) $12,800
D) $12,900
Expert Solution
Computation of the current earnings & profit:-
Corporations are allowed to deduct 50% of qualifying meals expenses.
Current earnings & profit = Taxable income - Meals expense + Capital loss
= $10,000 - ($200 * 50%) + $3,000
= $10,000 - $100 + $3,000
= $12,900
Hence, the correct option is D) $12,900
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