I:6-38 Illegal Payments. Damian Corporation is engaged in the business of purchasing and importing carpets. The carpets are imported from a country which the U.S. has banned as a source of imports. Following is a list of income and expense items for the year:

Item Amount Sales $750,000 Cost of goods sold 270,000 Salaries 75,000 Freight 22,500 Bribes to customs officials 30,000 Lease payments on warehouses 15,000 Interest expense 12,000

a. What is the taxable income of Damian Corporation from the illegal business activity?

b. Assume the same facts as in Part a except that Damian’s business consists of buying and selling illegal drugs. What is Damian’s taxable income from this illegal business activity?