Corporation C had book income of $500,000. Included in book income was $10,000 of municipal bond interest. C paid $5,000 in premiums for a life insurance policy on its CEO (C is the beneficiary). C also had a net capital loss of $8,000 for the year. What is C's taxable income?

Start: $500,000. Less: Municipal interest (nontaxable) ($10,000). Add back: Life insurance premiums (nondeductible because Corp is beneficiary) +$5,000. Add back: Net capital loss (Corporations can only offset capital gains; net capital losses are not deductible in the current year) +$8,000 (assuming it was deducted to arrive at book income). Taxable Income = $500,000 - $10,000 + $5,000 + $8,000 = $503,000.