40. Identify which of the following increases Earnings & Profits.

A) a capital contribution

B) tax-exempt interest income

C) life insurance proceeds payable to the spouse

D) All of the above increase E&P of a corporation.

41. Chen Corporation sells land (a noninventory item) with a basis of $60,000 for $120,000. Chen will be paid on an installment basis in five equal annual payments, starting in the current year. The E&P for the year of sale will be increased as a result of the sale (excluding federal income taxes) by

A) $0.

B) $8,600.

C) $43,000.

D) $48,000.

42. Steel Corporation buys equipment in January of the current year with a seven-year class life for $20,000. The corporation expensed the $20,000 under Sec. 179. The deduction in the year of purchase for E&P purposes due to the acquisition and expensing of the equipment is

A) $1,500.

B) $3,000.

C) $4,000.

D) $15,000.