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Iindicate the effect on taxable income

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Reference no: EM13343594

Corporate Earnings, Distributions, Redemptions and Liquidations

In each of the following independent situations, indicate the effect on taxable income and E & P, stating the amount of any increase (or decrease) that occurs as a result of the transaction. Assume E&P has already been increased by taxable income.

Paste the following table into a Microsoft Word document (or replicate the table), fill in the blank cells, and provide a brief, 1-3 sentence explanation/justification of your answers for each row in a numbered list below the table. Submit to the assignment drop box. 

Transaction Taxable Income Increase (Decrease) E&P Increase
1. Realized gain of $50,000 on involuntary conversion of building ($30,000 of gain is recognized)    
2. Mining exploration costs incurred on June 1 of the current year; $24,000 is deductible from current-year taxable income    
3. Sale of equipment to unrelated third party for $300,000; basis is $200,000 (no election out of installment method; no payments are received in the current year).    
4. Dividends of $35,000 received from 5%-owned corporation, together with dividends received deduction (assume taxable income limit does not apply).    
5. Domestic production activities deduction of $55,000 is claimed in current year.    
6. Section 179 expense deduction of $45,000 in current year.    
7. Impact of current-year section 179 expense deduction for previous item in succeeding year.    
8. MACRS depreciation of $80,000.  ADS depreciation would have been $88,000.    
9. Federal income taxes paid in the current year of $52,000    

Reference no: EM13343594

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