In each of the following independent situations indicate the effect on taxable income and Earnings & Profit, stating the amount of any increase (or decrease) as a result of the transaction. Assume E & P has already been increased by taxable income.
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 $120,00 (no election out of installment method; no payments are received in the current year.)
d. Dividends of $20,000 received from 5% owned corp., together with dividends received deduction (assume taxable income limit does not apply)
e. Domestic production activities deduction of $45,000 claimed in the current year.
f. Section 179 expense deduction of $100,000 in current year.
g. Impact of current-year ss 179 expense deduction in succeeding year.
h. MACRS depreciation of $80,000. ADS depreciation would have been $90,000.
i. Federal income taxes paid in the current year of $80,000.
