Question Using the legend provided, classify ea

Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income isbeing adjusted to arrive at current E & P for 2014.

a. Increase

b. Decrease

c. No effect

1. Gain on installment sale in 2014 deferred until 2015.

2. Interest received from municipal bonds in 2014.

3. Federal income tax refunds from tax paid in prior years.

4. Loss on sale between related parties in 2014.

5. Meal and entertainment expenses not deducted in 2014 because of the 50% limitation.

6. to shareholders in 2014.

7. Gain realized, but not recognized, in a like-kind exchange transaction in 2014.

8. Domestic production activities deduction claimed in 2014.

9. Premiums paid on key employee life insurance policy (assume no increase in cash surrender value of policy) in 2014.

10. Section 179 expense in second year following election.

Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income isbeing adjusted to determine current E & P.

a. Increase

b. Decrease

c. No effect

11. Penalties paid to state government for failure to comply with state law.

12. Dividends received deduction.

13. Charitable contribution carryforward deducted in the current year.

14. Intangible drilling costs deducted currently.

15. Gain realized (but not recognized) on a like-kind exchange.

16. A decrease in the LIFO recapture amount during the year.

17. Excess capital loss in year incurred.

18. State income tax paid in the current year.

19. Proceeds of life insurance received upon the death of a key employee (policy had no cash surrender value).

20. On January 1, Gold Corporation (a calendar year taxpayer) has E & P of $30,000 and generates no additional E & P during the year. On March 31, the corporation distributes $40,000 to its sole shareholder, Wyatt (basis in stock of $8,000). Determine the effect of the distribution on Wyatt’s taxable income and stock basis.