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 calculate A taxable income, start with the federal taxable income of $500,000. Since state income taxes are not deductible for A tax purposes, the $45,000 state income tax expense does not affect the calculation. However, the difference in depreciation between federal ($300,000) and state ($250,000) tax purposes, which is $50,000, must be added back to the federal taxable income. Therefore, A taxable income is $500,000 + $50,000 = $550,000.

Ramirez Corporation Is Subject to Income Tax Only in State