During the current tax year, Taxus Corporation has ordinary income of $110,000,

Question

During the current tax year, Taxus Corporation has ordinary income of $110,000, a long-term capital loss of $20,000, and a short-term capital loss of $5,000.

1. Calculate Taxus Corporation's tax liability

TABLE 11.1 Corporate Tax Rates Taxable
Income Over
But Not Over
The Tax Is Of the
Amount Over $0 $50,000 15% $0 50,000 75,000 $7,500 + 25% 50,000 75,000 100,000 13,750 + 34% 75,000 100,000 335,000 22,250 + 39% 100,000 335,000 10,000,000 113,900 + 34% 335,000 10,000,000 15,000,000 3,400,000 + 35% 10,000,000 15,000,000 18,333,333 5,150,000 + 38% 15,000,000 18,333,333 — 6,416,667 + 35% 18,333,333

Explanation / Answer

Capital losses = Carried forward

Tax on ordianry Income = $ 22250 + ( 110000 - 100000 ) * 39% = $ 26150

Total tax liability = $ 26150 = $ 26150

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