Which of the following statements is incorrect with respect to computing current E & P?

a.   All tax-exempt municipal bond interest income should be subtracted from taxable income.
b.   The dividends received deduction should be added back to taxable income.
c.   Current year charitable contributions in excess of the 10% of taxable income limit should be subtracted from taxable income.
d.   Federal income tax refunds received should be added to taxable income.
e.   None of the above statements are incorrect.

Expert Solution

The correct answer is option a. All tax exempt municipal bond interest income should be substracted from taxable income.

As One of the adjustments that will increase entity's E & P is additing back of tax-exempt income, which is generally not included while calculating taxable income, so the above statement is incorrect.

All tax-exempt bond interest income should be added to the income for computation of E & P.

ekkarill92 answered 2 years ago

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