Question

During 2019, Savannah Corporation, a calendar year C corporation, had operating income of $730,000, operating expenses of $400,000, a short-term capital loss of $30,000, and a long-term capital gain of $90,000. What is Savannah's tax liability for 2019?

Answer 1

Answer:

$81,900

Explanation:

tax liability = (total income - total expenses + long term capital gains - short term capital gains) x tax rate

tax liability = ($730,000 - $400,000 + $90,000 - $30,000) x 21% (corporate tax established by TC&JA) = $390,000 x 21% = $81,900

Corporations pay the same tax rate for normal income or capital gains, unlike individuals who generally pay lower capital gains rates.