1. CALCULATION OF CORPS INCOME TAXES

Does Exxon Corp (30% tax rate) owe taxes on its income if:

a) Had $5,000 in gross receipts;

b) COGS was $2,000;

c) Received $500 in interest on municipal bonds;

d) Paid dividends of $600 to shareholders;

e) At client dinner, paid $100 for employees spouses share who went to college with client;

f) Paid $700 of punitive damages to vendor;

g) Paid $800 to an oil lobby firm;

h) Paid a $200 bribe to foreign official;

i) Had $1,000 NOL carryforward; and

Had a $900 credit for constructing handicap ramps?

2. CARRYBACK OF CAPITAL LOSSES

ACE Corp sold an asset for a $300 capital loss in 2005, but it had no capital gains in 2005 to use the $300 capital loss to offset capital gains

ACE had $100 capital gains for 2002, 2003, & 2004

Since ACE did not use the 2005 capital gain, it can carryback its 2005 $300 capital loss to the 3 years prior to 2005 in order to offset the $100 capital gains in 2002, 2003 and 2004.

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