Dough Company sold an asset on the first day of the tax year for $100,000.Dough's tax basis for the asset was $60,000.Because of differences in cost recovery schedules,the state regular-tax basis in the asset was $40,000.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 difference between the federal tax basis and the state tax basis is $20,000 ($60,000 - $40,000). This difference will result in a $20,000 increase in federal taxable income.

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