Reference no: EM13343148

- On January 2, 2011, Orange Corporation purchased equipment for $300,000 with an ADS recovery period of 10 years and a MACRS useful life of 7 years. Section 179 was not elected. MACRS depreciation properly claimed on the asset, including depreciation in the year of sale, totaled $79,605. The equipment was sold on July 1, 2012, for $290,000. As a result of the sale, the adjustment to taxable income needed to arrive at current E & P is:

a. No adjustment is required.
b. Decrease $49,605.
c. Increase $49,605.
d. Decrease $79,605.
e. None of the above.

- Tungsten Corporation, a calendar year cash basis taxpayer, made estimated tax payments of $800 each quarter in 2011, for a total of $3,200. Tungsten filed its 2011 tax return in 2012 and the return showed a tax liability $4,200. At the time of filing, March 15, 2012, Tungsten paid an additional $1,000 in Federal income taxes. How does the additional payment of $1,000 impact Tungsten's E & P?

a. Increase by $1,000 in 2011.
b. Increase by $1,000 in 2012.
c. Decrease by $1,000 in 2011.
d. Decrease by $1,000 in 2012.
e. None of the above.