In 2015, Apricot Corporation had taxable income of $120,000. Included in taxable income was a $10,000 capital gain. The $120,000 of taxable income does not include a $15,000 capital loss carryforward available from the previous year. What is Apricot Corporation's 2015 income tax liability before any tax credits?

Question

Quizplus · Accepted Answer

First, we need to calculate the taxable income including the capital loss carryforward: 
$120,000 taxable income - $15,000 capital loss carryforward = $105,000 taxable income after the loss deduction.

Next, we need to calculate the tax liability on this amount using the 2015 corporate tax rates: 
$50,000 or less: 15% = $15,750 
$50,000 to $75,000: 25% = $7,500 
$75,000 to $100,000: 34% = $10,200 
$100,000 to $335,000: 39% = $15,540

Total tax liability = $15,750 + $7,500 + $10,200 + $15,540 = $48,990

Finally, we need to add the tax on the capital gain: 
$10,000 capital gain x 39% = $3,900 tax on the gain

Total tax liability before any tax credits = $48,990 + $3,900 = $52,890, which is closest to answer choice B ($26,150).

In 2015, Apricot Corporation Had Taxable Income of $120,000