In the current year, Tanager Corporation (a calendar year C corporation) had operating income of $480,000 and operating expenses of $390,000. In addition, Tanager had a long-term capital gain of $55,000 and a short-term capital loss of $40,000.

a. Compute Tanager's taxable income and tax for the year.
Taxable income: $
Income tax: $

b. Assume the same facts except that Tanager's long-term capital gain was $15,000. Compute Tanager's taxable income and tax for the year.
Taxable income: $
Income tax: $

a.

Total Taxable Income = $105,000

Tax of the year = $24,200

b.

Total Taxable Income = $65,000

Tax of the year = $11,250

Explanation:

a.

Given

Operating Income = $480,000

Operating Expenses = $390,000

Capital Gain = $55,000

Capital Loss = $40,000

From the above

Taxed Operating Income = Operating Income - Operating Expense

Taxed Operating Income = $480,000 - $390,000

Taxed Operating Income = $90,000

Capital Gain (Loss) = Capital Gain - Capital Loss

Capital Gain (Lossl = $55,000 - $40,000

Capital Gain (Loss) = $15,000

Total Taxable Income = Taxed Operating Income + Capital Gain (Loss)

Total Taxable Income = $90,000 + $15,000

Total Taxable Income = $105,000

Calculating Tax of the year...

For $0 to $50,000; the tax is $7,500

For $50,000 to $75,000; the tax is $6,250

For $75,000 to $100,000; the tax is $8,500

For $100,000 to $335,000; the tax is $1,950

Total Tax of the year = $7,500 + $6,250 + $8,509 + $1,950

Total = $24,200

b.

Given

Operating Income = $480,000

Operating Expenses = $390,000

Capital Gain = $15,000

Capital Loss = $40,000

From the above

Total Taxable Income = Operating Income - Operating Expense

Total Taxable Income = $480,000 - $390,000

Total Taxable Income = $90,000

Capital Gain (Loss) = Capital Gain - Capital Loss

Capital Gain (Lossl = $15,000 - $40,000

Capital Gain (Loss) = -$25,000

Total Taxable Income = Taxed Operating Income + Capital Gain (Loss)

Total Taxable Income = $90,000 - $25,000

Total Taxable Income = $65,000

Calculating Tax of the year...

For $0 to $50,000; the tax is $7,500

For $50,000 to $75,000; the tax is $3,750

Total Tax of the Year = $7,500 + $3,750

Total = $11,250

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