Question

Violet Corporation is subject to tax only in State A. They have Federal taxable income of $169,000, state income tax expense of $50,000, excess depreciation deduction allowed for Federal purposes of $100,000, dividends from other U.S. corporations of $70,000, and interest on Federal obligations of $50,000. Calculate State A taxable income.

A.) $219,000 B.) $169,000 C.) $199,000 D.) $101,000

Answer 1

Federal taxable income is used as starting point in computing state’s income tax base, subject to modifications to federal taxable income

	Amount ($)
Federal taxable income	169,000
Addition modifications
State income tax expense	50,000
Excess depreciation deduction allowed for federal tax purpose	100,000
Deduction modifications
dividends from other U.S. corporations	(70,000)
interest on Federal obligations	(50,000)
State A taxable income	$ 199,000

Hence, correct option is $ 199,000