Question

Elk, a C corporation, has 370,000 operating income and 290,000 operating expenses during the current year. In addition, Elk has a 10,000 long-term capital gain and a 17,000 short-term capital loss. Elk's taxable income is:

1) 90,000
2) 80,000
3) 73,000
4) 63,000
5) None of these choices are correct

Answer 1

Elk's taxable income is calculated by subtracting operating expenses and net capital loss from operating income, resulting in a taxable income of $73,000.

Step-by-step explanation:

The student's question revolves around calculating the taxable income of Elk, a C corporation. Considering the provided information, Elk has operating income of $370,000 and operating expenses of $290,000, resulting in a net operating income of $80,000 ($370,000 - $290,000). Additionally, Elk has a long-term capital gain of $10,000 and a short-term capital loss of $17,000.

The capital gain and loss will offset each other, and the remaining net capital loss of $7,000 ($17,000 - $10,000) can be deducted from the net operating income, ultimately reducing Elk's taxable income. Therefore, Elk's taxable income can be calculated as follows: $80,000 (net operating income) - $7,000 (net capital loss) = $73,000.