Corporation's Taxable Income and Regular Income Tax Liability.
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Capital Corporation had the following results in 2012:
Gross receipts from operations: $200,000
Net short-term capital gain: $50,000
Net long-term capital loss: ($75,000)
Cost of goods sold: $60,000
Operating expenses: $40,000
Dividends received from 30% owned domestic corporation: $80,000
What is Capital Corporation's taxable income and regular income tax liability for 2012?
Assuming that Capital Corporation's taxable income in 2011, its first year of existence, was $400,000, which included a net short-term capital gain of $50,000, what advice should be given to Capital with respect to its net capital asset position for 2012?
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Solution Summary
This solution breaks down the taxable income and regular income tax liability based on the student information provided. The taxable income and regular income tax liability are both calculated and explained. The net short-term capital gain is also discussed, including the advice that should be given to Capital with respect to its net capital asset position for 2012.
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Income
Gross receipts from operations $200,000
Cost of goods sold $60,000
Gross profit $140,000
Dividends received from 30% owned
domestic corporation $80,000
Net capital loss ($25,000)
Total income $195,000
Expenses
Operating Expenses -$40,000
Taxable Income before the dividends-received $155,000
Dividends-received deduction is 80% of $80,000 $64,000
Taxable Income $91,000
Tax ...
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