LO.2 In each of the following independent situations, indicate the effect on taxable income and E & P, stating the amount of any increase (or decrease) 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. Realized gain of $80,000 on involuntary conversion of building ($10,000 of gain is recognized). ______________ ______________

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

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 the 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). ______________ ______________

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

f. Section 179 expense deduction of $100,000 in current year. ______________ ______________ g. Impact of current-year § 179 expense deduction in succeeding year. ______________ ______________ h. MACRS depreciation of $80,000. ADS depreciation would have been $90,000. ______________ ______________ i. Federal income taxes of $80,000 paid in the current year. ______________ ______________