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?