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Corporation reported a net operating loss of $400,000 in 20X3, which the corporation elected to carryforward to 20X4. Included in the computation of the loss was regular depreciation of $100,000 (E&P depreciation is $40,000), first year expensing under §179 of $50,000, and a dividends received deduction of $10,000. The corporation's current earnings and profits for 20X3 would be: A. ($290,000) B. ($330,000) C. ($400,000) D. ($490,000) A. ($290,000)

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Answer:

A. ($290,000)

Explanation:

The corporation's current earnings and profits would be calculates as:

($400,000) + $60,000 + $40,000 + $10,000 = ($290,000).

The first year expensing under §179 of $50,000 must be capitalized andamortized over 5 years ($10,000 per year).

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