How is "taxable income" defined for a corporation?

Taxable income for a corporation is defined as the income that is subject to tax after accounting for deductions, exemptions, and credits. This means it represents the net income calculated by taking the total revenue generated by the corporation and subtracting allowable business expenses, deductions, exemptions, and applicable tax credits.

Understanding taxable income is crucial because it forms the basis for determining how much tax the corporation will owe. Corporations can deduct various business-related expenses from their gross income, such as operating costs, salaries, interest on debt, and depreciation. After applying these deductions and accounting for any available tax credits that reduce the overall tax liability, what remains is identified as taxable income.

Other definitions such as total revenue generated or income after all expenses do not accurately capture the nuances of taxable income. The total revenue is just the sales or revenue before any deductions, while net income after all expenses does not account for the adjustments that tax law allows or requires. Additionally, the profit remaining after dividends are distributed pertains more to the distribution of profits to shareholders rather than the calculation of taxable income itself, which is focused on what is reported to the tax authorities before any distributions occur.