In each of the following independent situations, indicate the effect on taxable income and E & P, stating the amount of any increase (or decrease) in each as a result of the transaction. Assume that E & P has already been increased by taxable income.

Transaction

a.) Realized gain of $80,000 on involuntary conversion of building ($10,000 of gain is recognized).

Taxable Income Increase (Decrease) E&P Increase (Decrease)

b.) Mining exploration costs incurred on May 1 of current year; $24,000 is deductible from current-year taxable income.

Taxable Income Increase (Decrease) E&P Increase (Decrease)

c.) 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)/

Taxable Income Increase (Decrease) E&P Increase (Decrease)

d.) Dividends of $20,000 received from 5% owned corporation, together with dividends received deduction (assume that taxable income limit does not apply).

Taxable Income Increase (Decrease) E&P Increase (Decrease)

e.) Domestic production activities deduction of $45,000 claimed in current year.

Taxable Income Increase (Decrease) E&P Increase (Decrease)

f.) Section 179 expense deduction of $25,000 in current year

Taxable Income Increase (Decrease) E&P Increase (Decrease)

Impact of current-year 179 expense deduction in succeeding year.

Taxable Income Increase (Decrease) E&P Increase (Decrease)

h.) MACRS depreciation of $80,000. ADS depreciation would have been $90,000.

Taxable Income Increase (Decrease) E&P Increase (Decrease)

i.) Federal income taxes of $80,000 paid in current year.

Taxable Income Increase (Decrease) E&P Increase (Decrease)