Question

Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is...

Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2017.
Legend: a.   Increase         b.   Decrease       c.   No effect

  • Gain on installment sale in 2017 deferred until 2018   
  • Interest received from municipal bonds in 2017
  • Federal income tax refunds from tax paid in prior years   
  • Loss on sale between related parties in 2017
  • Meal and entertainment expenses not deducted in 2017 because of the 50% limitation
  • Cash dividends distributed to shareholder in 2017   
  • Gain realized, but not recognized, in a like-kind exchange transaction in 2017   
  • Domestic production activities deduction claimed in 2017   
  • Premiums paid on key employee life insurance policy (assume no increase in cash surrender value of policy) in 2017
  • Section 179 expense in second year following election   


Question asking that each line is increase, decrease or no effect?
Thank you.

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Answer #1
Gain on installment sale in 2017 deferred util 2018 Increase
Interest received from municipal bonds in 2017 Increase
Federal income tax refund from tax paid in prior year Increase
Loss on sale between related parties in 2017 Decrease
Meal and entertainment expenses not deducted in 2017 because of the 50% limitation Decrease
Cash dividends distributed to shareholder in 2017    No effect
Gain realized, but not recognized, in a like-kind exchange transaction in 2017    Increase
Domestic production activities deduction claimed in 2017    Increase
Premiums paid on key employee life insurance policy (assume no increase in cash surrender value of policy) in 2017 Decrease
Section 179 expense in second year following election Decrease

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