What is Gigantic Corporation's net tax liability if its taxable income is $325,000 and it has a general business credit of $125,000?

Question

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To calculate the net tax liability, we must first calculate the regular tax liability using the tax rate schedule for corporations:

Taxable Income: $325,000
Tax on first $50,000: $7,500 (15%)
Tax on next $25,000: $3,750 (25%)
Tax on next $25,000: $3,750 (34%)
Tax on next $225,000: $76,500 (39%)
Total Tax Liability: $91,500

Next, we subtract the general business credit from the regular tax liability:

Regular Tax Liability: $91,500
General Business Credit: $125,000
Net Tax Liability: -$33,500

The answer is B) $63,750 because it is the option closest to -$33,500. The negative net tax liability indicates that Gigantic Corporation would receive a refund from the government due to the excess credit.

What Is Gigantic Corporation's Net Tax Liability If Its Taxable