Sparrow Corporation (a calendar year, accrual basis taxpayer) had the following transactions in 2020, its second year of operation: Taxable income $330,000 Federal income tax liability paid 69,300 Tax-exempt interest income 5,000 Business meals expense (total) 3,000 Premiums paid on key employee life insurance 3,500 Increase in cash surrender value attributable to life insurance 700 premiums 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 in 2019 25,000 Dividends received from domestic corporations (less than 20% ovned) 35,000 Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by $10,000 during 2020. In addition, Sparrovw sold property on installment during 2019. The property vas sold for $40,000 and had an adjusted basis at sale of $32,000. During 2020, Sparrow received a $15,000 payment on the installment sale. Finally, assume that no additional first-year depreciation was claimed. Click here for the Dividend Received Deduction Table. Indicate whether each item (or part of the item) is "Added" to, "Deducted" from taxable income, or "No effect" when computing current E&R Federal income tax liability paid Tax-exempt interest income Non-deductible meals and entertainment expenses Life insurance premiums paid, net of increase in cash surrender value Proceeds from life insurance policy, net of cash surrender value Excess of capital losses over capital gains Excess MACRS deduction Section 179 expense elected in 2019 Dividends received deduction from domestic corporations LIFO adjustment Installment sale In your computations, if required, round amounts to the nearest dollar. Sparrow Corporation's current E& P is s
Sparrow Corporation (a calendar year, accrual basis taxpayer) had the following transactions in 2020, its second year of operation: Taxable income $330,000 Federal income tax liability paid 69,300 Tax-exempt interest income 5,000 Business meals expense (total) 3,000 Premiums paid on key employee life insurance 3,500 Increase in cash surrender value attributable to life insurance 700 premiums 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 in 2019 25,000 Dividends received from domestic corporations (less than 20% ovned) 35,000 Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by $10,000 during 2020. In addition, Sparrovw sold property on installment during 2019. The property vas sold for $40,000 and had an adjusted basis at sale of $32,000. During 2020, Sparrow received a $15,000 payment on the installment sale. Finally, assume that no additional first-year depreciation was claimed. Click here for the Dividend Received Deduction Table. Indicate whether each item (or part of the item) is "Added" to, "Deducted" from taxable income, or "No effect" when computing current E&R Federal income tax liability paid Tax-exempt interest income Non-deductible meals and entertainment expenses Life insurance premiums paid, net of increase in cash surrender value Proceeds from life insurance policy, net of cash surrender value Excess of capital losses over capital gains Excess MACRS deduction Section 179 expense elected in 2019 Dividends received deduction from domestic corporations LIFO adjustment Installment sale In your computations, if required, round amounts to the nearest dollar. Sparrow Corporation's current E& P is s
Chapter5: Corporations: Earnings & Profits And Dividend Distributions
Section: Chapter Questions
Problem 27P
Related questions
Question
See Attached 5.27 with Dividened Reduction Table
Transcribed Image Text:Problem 5-27 (LO. 2)
Sparrow Corporation (a calendar year, accrual basis taxpayer) had the following transactions in 2020, its second year of operation:
Taxable income
$330,000
Federal income tax liability paid
69,300
Tax-exempt interest income
5,000
Business meals expense (total)
3,000
Premiums paid on key employee life insurance
3,500
Increase in cash surrender value attributable to life insurance
700
premiums
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 in 2019
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 2020. In addition, Sparrow sold
property on installment during 2019. The property vas sold for $40,000 and had an adjusted basis at sale of $32,000. During 2020,
Sparrow received a $15,000 payment on the installment sale. Finally, assume that no additional first-year depreciation was claimed.
Click here for the Dividend Received Deduction Table.
Indicate whether each item (or part of the item) is "Added" to, "Deducted" from taxable income, or "No effect" when computing current
E & P.
Federal income tax liability paid
Tax-exempt interest income
Non-deductible meals and entertainment expenses
Life insurance premiums paid, net of increase in cash
surrender value
Proceeds from life insurance policy, net of cash surrender
value
Excess of capital losses over capital gains
Excess MACRS deduction
Section 179 expense elected in 2019
Dividends received deduction from domestic corporations
LIFO adjustment
Installment sale
In your computations, if required, round amounts to the nearest dollar.
Sparrow Corporation's current E & P is $
Transcribed Image Text:EXHIBIT 3.2
Dividends Received Deduction
Percentage of Ownership by Corporate Shareholder
Deduction Percentage
Less than 20%
50%
20% or more (but less than 80%)
65%
80% or more*
100%
*The payor corporation must be a member of an affiliated group with the recipient corporation.
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Author:
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