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During the current year, Jay Corporation, a calendar year personal service corporation, had operating income of income of $240,000, operating expenses of $200,000, a short-term capital gain of $9,500, and a long-term capital loss of $7,000. How much is Jay's income tax liability for the year? Assuming, corporate tax rate of 21%.
a. $5.775
b. $8,500
c. None of the above.
d. $8,750
e. $3,750



Answer :

TutorEsme
Step 1: Calculate the net operating income by subtracting operating expenses from operating income: 240,000 - 200,000 = $40,000

Step 2: Calculate the taxable income by adding the net operating income and the short-term capital gain, and then subtracting the long-term capital loss:$40,000 + 9,500 - 7,000 = $42,500

Step 3: Calculate the income tax liability by multiplying the taxable income by the corporate tax rate of 21%:$42,500 * 21% = $8,925

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