Dough Company sold an asset on the first day of the tax year for $500,000.Dough's Federal tax basis for the asset was $300,000.Because of differences in cost recovery schedules,the state regular-tax basis in the asset was $350,000.What adjustment,if any,should be made to Federal taxable income in determining the correct taxable income for the typical state?

Question

Quizplus · Accepted Answer

The adjustment needed is ($50,000) because the state basis ($350,000) is higher than the federal basis ($300,000), resulting in a $50,000 lower gain for state tax purposes.

Dough Company Sold an Asset on the First Day of the Tax