Pet Instructional Programs Corp. (PIP) and its 90% owned subsidiary, Squeak Toys Ltd (Squeak), join in filing consolidated returns for U.S. tax purposes. On August 12, 2017, Squeak purchased new office furniture for $16,400, which Squeak immediately placed into service in its business. On January 1, 2018, when the office furniture had an adjusted basis of $7,088, Squeak sold the office furniture to PIP for $11,400. Although PIP immediately placed the office furniture into service in 2018, PIP ended up selling the office furniture to an unrelated purchaser on February 16, 2019. Under the terms of the sale, the unrelated purchaser agreed to pay PIP 15% of whatever profit the purchaser reported in the month of October for nine consecutive years, starting with October 2019. Accordingly, the unrelated purchaser made its first payment to PIP of $1,700 on November 15, 2019.

Explain what depreciation, gain, and/or loss PIP and Squeak would include in their respective separate taxable incomes (i.e., taxable income after any adjustments for intercompany transactions) for 2018 and 2019 with respect to the office furniture.