Delta Inc. generated $668,200 ordinary income from operations this year. It also recognized $3,910 recaptured ordinary income, $5,000 net Section 1231 gain, and $14,600 net capital loss on the sale of assets. Compute Delta's taxable income.

Question

Quizplus · Accepted Answer

Delta's taxable income is calculated by adding the ordinary income from operations ($668,200) and the recaptured ordinary income ($3,910), then adding the net Section 1231 gain ($5,000), and finally subtracting the net capital loss ($14,600). This results in $668,200 + $3,910 + $5,000 - $14,600 = $672,510. However, since capital losses can only offset capital gains, the net capital loss does not affect ordinary income, so the taxable income is $668,200 + $3,910 + $5,000 = $677,110. But since the net capital loss is not deductible against ordinary income, the correct taxable income is $668,200 + $3,910 = $672,110, rounded to $672,100.

Delta Inc Generated $668,200 Ordinary Income from Operations This Year