Here you go:

1). Reclassification from trading to AFS won't have any impact on AFS valuation allowance. As trading security was presumably revalued to FV (50,000) as of Dec.31,2005 before transfer to AFS. As per the transfer rules, FV of trading security (50,000) becomes the new value in AFS category and valuation allowance of AFS is not adjusted for any prior revaluations when it was a trading security. In other words, what happened, happened.

2). AFS valuation allowance for the second item was 45,000 (75K less 30K) at the start of 1995. At end of the year, market value moved from 30K to 60K so valuation allowance needs to be adjusted accordingly. Valuation allowance as at Dec.1995 should be 15,000 (75k less 60k). Going from opening balance of 45,000 to ending balance of 15,000 will result in a 30,000 decrease in valuation allowance which is the correct answer.

The bolded quote above is EXACTLY the information I needed to aid my comprehension for this problem! Whew! Thank you!!

What I had in my notes was:
UNREALIZED GAIN/LOSS (Valuation Account):
YR. 1:  Loss 45
YR. 2:  GAIN 30
Total:  Loss 15 

So I was trying to figure out how the solution/number $30 came into play here????  But as mentioned if we take the Beginning balance (45) and subtract the ending Valuation balance (15)....this equals the $30!!  Thanks again for your explanation!!! :-)

ETA:  (to aid in using the search feature on this site...this is for problem  cpa-00527)

they want the net effect, not the ending balance.......