Cardinal Corporation, a calendar year taxpayer, receives dividend income of $250,000 from a corporation in which it holds a 10% interest. Cardinal also receives interest income of $35,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct a library.) Cardinal borrowed funds to purchase the municipal bonds and pays $20,000 of interest on the loan. Excluding these three items, Cardinals taxable income is $500,000. Cardinal has $150,000 of accumulated E & P at the end of the prior year, and it paid Federal income taxes of $200,000 during the year. a. What is Cardinal Corporations taxable income after these three items are taken into account? b. What is Cardinal Corporations accumulated E & P at the start of next year? Transaction Taxable Income Increase (Decrease) E & P Increase (Decrease) 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 current year; $24,000 is deductible from current-year taxable income. c. Sale of equipment to unrelated third party for $240,000; basis is $120,000 (no election out of installment method; no payments are received in current year). d. Dividends of $20,000 received from 5% owned corporation, together with dividends received deduction (assume that taxable income limit does not apply). e. Domestic production activities deduction of $45,000 claimed in current year. f. Section 179 expense deduction of $25,000 in current year. g. Impact of current-year 179 expense deduction in succeeding year. h. MACRS depreciation of $80,000. ADS depreciation would have been $90,000. i. Federal income taxes of $80,000 paid in current year.