Loon, Inc Reported Taxable Income of $600,000 in Year 1 and and Paid

Short Answer

Loon, Inc. reported taxable income of $600,000 in year 1 and paid federal income taxes of $202,000. Not included in the company's computation of taxable income is tax-exempt interest of $30,000, disallowed meals and entertainment expenses of $15,000, and disallowed expenses related to the tax-exempt income of $4,000. Loon deducted depreciation of $200,000 on its tax return. Under the alternative (E&P) depreciation method, the deduction would have been $80,000. Compute the company's current E&P for year 1.