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    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?

    © BrainMass Inc. brainmass.com October 10, 2019, 5:24 am ad1c9bdddf
    https://brainmass.com/business/accounting/corporations-taxable-income-regular-income-tax-liability-503863

    Solution Preview

    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 ...

    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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