Ramirez Corporation is subject to income tax only in State A. Ramirez generated the following income and deductions. $$\begin{array} { l r }
\text { Federal taxable income } & \$ 500,000 \
\text { State A income tax expense } & 45,000 \
\text { Depreciation allowed for Federal tax purposes } & 300,000 \
\text { Depreciation allowed for state tax purposes } & 250,000
\end{array}$$ ? 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 income tax only in State A. Ramirez generated the following income and deductions. $$\begin{array} { l r } 
\text { Federal taxable income } & \$ 500,000 \
\text { State A income tax expense } & 45,000 \
\text { Depreciation allowed for Federal tax purposes } & 300,000 \
\text { Depreciation allowed for state tax purposes } & 250,000
\end{array}$$ ? 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. Since state income taxes are not deductible, add back the $45,000 state tax expense. Also, adjust for the difference in depreciation: add back $300,000 (federal) and subtract $250,000 (state), resulting in an additional $50,000. Thus, $500,000 + $45,000 + $50,000 = $595,000.

Ramirez Corporation Is Subject to Income Tax Only in State