What booktax differences in year 1 and year 2 associated with its capital gains and losses would DEF Inc. report in the following alternative scenarios? Identify each booktax difference as favorable or unfavorable and as permanent or temporary.

a. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. In year 1, it also recognized a $30,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $20,000. DEF had deducted $40,000 of depreciation on the equipment. In year 2, DEF recognized a capital loss of $2,000.

	Book-Tax Difference	Favorable or Unfavorable	Temporary or Permanent
Year 1
Year 2