Kravitz Corporation had income before taxes of $900,000 and a tax rate of 45%. Included in the income are $80,000 in municipal bond interest and $10,000 in fines and penalties. There are no other book-tax differences. Refer to Kravitz Corporation. What is Kravitz's taxable income?

Question

Quizplus · Accepted Answer

Municipal bond interest is tax-exempt, so it is subtracted from income, while fines and penalties are not deductible, so they are added back. Taxable income = $900,000 - $80,000 + $10,000 = $830,000.

Kravitz Corporation Had Income Before Taxes of $900,000 and a Tax