Pheasant Corporation ended its first year of operations with taxable income of $225,000. At the time of Pheasant¡¯s formation, it incurred $50,000 of organizational expenses. In calculating its taxable income for the year, Pheasant claimed an $8,000 deduction for the organizational expenses. What is Pheasant¡¯s current E & P?

$183,000

To calculate Pheasant Corporation's current E & P (Earnings and Profits), we need to consider a few factors.

Earnings and Profits is a term used in tax law that is similar to the concept of retained earnings for financial accounting purposes. It represents the company's accumulated profits, which are used to determine the taxability of distributions to shareholders.

To calculate the current E & P, you would generally start with the accumulated E & P at the beginning of the year and make adjustments based on various transactions and events throughout the year.

In this case, since it's Pheasant Corporation's first year of operations, we can assume that the accumulated E & P at the beginning of the year is zero.

Now let's consider the adjustments that need to be made. The $50,000 of organizational expenses incurred at the time of formation should be capitalized and amortized over a period of 180 months, according to the IRS rules. However, since Pheasant Corporation claimed an $8,000 deduction for these expenses, we need to add back that deduction to calculate the adjusted taxable income.

To do the calculations, follow these steps:

1. Calculate the adjusted taxable income by adding back the organizational expense deduction:
Adjusted Taxable Income = Taxable Income + Organizational Expense Deduction
= $225,000 + $8,000
= $233,000

2. Calculate the amortization of the organizational expenses for the year:
Amortization Expense = Organizational Expenses / Amortization Period
= $50,000 / 180
= $277.78 (rounded to the nearest dollar)

3. Calculate the net E & P for the year by subtracting the amortization expense from the adjusted taxable income:
Net E & P = Adjusted Taxable Income - Amortization Expense
= $233,000 - $277.78
= $232,722.22 (rounded to the nearest dollar)

Therefore, Pheasant Corporation's current E & P is $232,722.