CHAPTERS Corporations Earrings & Profits and Dividend Distributions 28. L0.1,2 In each of the following independent situations, indicate the effect on tax- able income and E & P, stating the amount of any increase (or decrease Critical Thinking in each as a result of the transaction. Assume that E & P has already been increased by taxable income Transaction Taxable income Increase (Decrease) E&P increase (Decrease) a. b. c. Realized gain of $80,000 on involuntary conversion of building ($10,000 of gain is recognized) Mining exploration costs incurred on May 1 of current year; $24,000 is deductible from current-year taxable income. Sale of equipment to unrelated third party for $240,000; basis is $120,000 (no election out of installment method, no payments are received in current year). d. Dividends of $20,000 received from 5% owned corporation, together with dividends received deduction (assume that taxable income limit does not apply). Additional first-year (bonus) depreciation of $45,000 claimed in current year. Section 179 expense deduction of $25,000 in current year. Impact of current-year 5 179 expense deduction in succeeding year. h. MACRS depreciation of $80,000. ADS depreciation would have been $90,000. Federal income taxes of $80,000 paid in current year. e. 8