17. LO.1, 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) 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. 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 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 current year).

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

e. Additional first-year (bonus) depreciation of $45,000 claimed in current year.

f. Section 179 expense deduction of $25,000 in current year.
g. Continue with the facts of (f ) for the next tax year.
h. MACRS depreciation of $80,000. ADS depreciation would have been $90,000.
i. Federal income taxes of $80,000 paid in current year.