LO.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) 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).

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

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