REG = Why does Federal income taxes decrease Current Earnings & Profits?

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  • October 5, 2012 at 4:55 pm #174228
    Anonymous
    Inactive

    I’m working the Wiley CPA sims and one of the questions is about Acculumlated Earnings & Profits (AEP) and Current Earnings & Profits (CEP).

    Why does Federal income taxes decrease current earnings & profits? I thought federal income taxes were not deductible?

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  • October 5, 2012 at 6:36 pm #378790
    musicamor
    Member

    Think of E&P like you would retained earnings. FIT reduces retained earnings because it reduces NI; therefore reducing E&P. We're not necessarily dealing with deductibility when talking about E&P.

    Texas CPA - licensed in 2012!!!

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