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.
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Transaction |
Taxable Income |
E & P Increase |
a. |
Realized gain of $80,000 on |
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involuntary conversion of building |
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($10,000 of gain is recognized). |
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b. |
Mining exploration costs incurred on |
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May 1 of the current year; $24,000 is |
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deductible from current year taxable |
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income. |
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c. |
Sale of equipment to unrelated third |
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party for $240,000; basis is $120,000 |
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no election out of installment |
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method; no payments are received in |
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the current year). |
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d. |
Dividends of $20,000 received from |
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5% owned corporation, together |
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with dividends received deduction |
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assume that taxable income limit |
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does not apply). |
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e. |
Domestic production activities |
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deduction of $45,000 claimed in |
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current year. |
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f. |
Section 179 expense deduction of |
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$100,000 in current year. |
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g. |
Impact of current year § 179 expense |
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deduction in succeeding year. |
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h. |
MACRS depreciation of $80,000. ADS |
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depreciation would have been |
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$90,000. |
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i. |
Federal income taxes of $80,000 paid |
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in the current year. |
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