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Abra Corporation generated $100,000 of taxable income this year and realized a $4,000 loss on the sale of Starbucks Stoc...

Abra Corporation generated $100,000 of taxable income this year and realized a $4,000 loss on the sale of Starbucks Stock. Abra Corporations will pay $97,000 in taxable income. True or false. I know that the answer is false but looking for an explanation.

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Answer #1

Answer is $100,000.

Taxable income is that amount of income upon which the tax is calculated. The $100,000 taxable income is derived after deducting all deductions, exemptions or losses allowed in that year from the gross income. That means the $4000 loss on sale of Starbucks Stock is already deducted from the gross income to get the taxable income of $100,000. So the "Taxable income" itself describe as the final amount upon which the tax is to be calculated. Only deduction remaining after calculating the taxable income will be income tax.

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