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3. The following information for 2010 relates to Sparrow Corporation, a calendar year, accrual method taxpayer.
Net income per books (after-tax) $ 119,738
Federal income tax expense 49,862
Tax-exempt interest income 7,500
MACRS depreciation in excess of straight-line depreciation
Used for financial statement purposes 10,000
Charitable contribution in excess of taxable
Income limitation 8,750
Premiums paid on life insurance policy on the
president (Sparrow is beneficiary of the policy) 6,250
Interest on loan to purchase tax-exempt bonds 3,700
Based on the above information, use Schedule M-1 of Form 1120, which is available on the IRS Web site, to determine Sparrow’s taxable income for 2008.

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Thefollowinginformationfor2010relatestoSparrowCorporation,acalendaryear,accrual
methodtaxpayer.
Netincomeperbooks(aftertax)$119,738
Federalincometaxexpense49,862
Taxexemptinterestincome7,500...