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

Quizplus · Accepted Answer

To calculate A taxable income, start with the federal taxable income of $500,000. Since State A does not allow the deduction of its own income tax expense, the $45,000 is not subtracted. However, the difference in depreciation must be adjusted. State A allows $50,000 less in depreciation than the federal amount ($300,000 - $250,000 = $50,000). This means we need to add back this $50,000 difference to the federal taxable income, resulting in $500,000 + $50,000 = $550,000 as the A taxable income.

Ramirez Corporation, Which Is Subject to Income Tax Only in State