Flint Corporation is subject to a corporate income tax only in State X. The starting point in computing X taxable income is Federal taxable income. Flint's Federal taxable income is $750,000, which includes a $50,000 deduction for state income taxes. During the year, Flint received $10,000 interest on Federal obligations. X tax law does not allow a deduction for state income tax payments. Flint's taxable income for X purposes is:

Question

Quizplus · Accepted Answer

State X does not allow a deduction for state income tax payments, so the $50,000 deduction for state income taxes is added back to Flint's Federal taxable income of $750,000, resulting in a starting point of $800,000 in taxable income for State X. However, X tax law does not tax interest on Federal obligations, so the $10,000 interest income is not included in Flint's taxable income for State X. Therefore, Flint's taxable income for State X purposes is $790,000.

Flint Corporation Is Subject to a Corporate Income Tax Only