Hill Corporation Is Subject to Tax Only in State X

Hill Corporation is subject to tax only in State X. Hill generated the following income and deductions. State income taxes are not deductible for X income tax purposes. $$\begin{array} { l r } \text { Sales } & \$ 5,000,000 \\\text { Cost of sales } & 2,000,000 \\\text { State X income tax expense } & 160,000 \\\text { Depreciation allowed for Federal tax purposes } & 1,000,000 \\\text { Depreciation allowed for state tax purposes } & 800,000 \\\text { Interest income on Federal obligations } & 50,000 \\\text { Interest income on X obligations } & 200,000 \\\text { Expenses related to carrying X obligations } & 10,000\end{array}$$
a. The starting point in computing the State X income tax base is Federal taxable income. Derive this amount.
b. Determine Hill's State X taxable income, assuming that interest on X obligations is exempt from
State X income tax.
c. Determine Hill's taxable income, assuming that interest on X obligations is subject to State X
income tax.