Damian Corporation is engaged in the business of purchasing and importing carpets from Iran. Importing these carpets from Iran is illegal. 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 marijuana and cocaine. What is Damian’s taxable income from this illegal business activity?