Ramirez Corporation is subject to tax only in State A. Ramirez generated the following income and deductions.
$\begin{array}{llr}
\text { Federal taxable income} &\$500,000\
\text { State A income tax expense } &45,000\
\text {Depreciation allowed for Federal tax purposes } &300,000\
\text { Depreciation allowed for state tax purposes } &250,000\
\end{array}$

Federal taxable income is the starting point in computing A taxable income. State income taxes are not deductible
For A tax purposes. Ramirez's A taxable income is:

Question

Ramirez Corporation is subject to tax only in State A. Ramirez generated the following income and deductions.
$\begin{array}{llr}
  \text {  Federal taxable income} &\$500,000\
 \text { State A income tax expense } &45,000\
 \text {Depreciation allowed for Federal tax purposes  } &300,000\
 \text { Depreciation allowed for state tax purposes } &250,000\
\end{array}$

Federal taxable income is the starting point in computing A taxable income. State income taxes are not deductible
For A tax purposes. Ramirez's A taxable income is:

Quizplus · Accepted Answer

To compute State A taxable income, start with the federal taxable income of $500,000. Add back the state income tax expense of $45,000 because it is not deductible for state tax purposes. Also, add back the difference in depreciation ($300,000 - $250,000 = $50,000) since the state allows less depreciation. Thus, $500,000 + $45,000 + $50,000 = $595,000.

Ramirez Corporation Is Subject to Tax Only in State A Ramirez