Joined: 18 May 2011
Online Status: Offline Posts: 57
Posted: 02 Aug 2012 at 10:14 | IP Logged
The correct answer is c because there are no adjustments necessary from book income to taxable income. State income taxes are an allowable deduction on federal TI. Interest earned on US Treasury bonds is taxable. Interest on municipal bonds is not taxable, but these are not municipal bonds. Interest expense to purchase the US bonds is deductible since the interest earned on the bonds is taxable. Book income = taxable income.
Joined: 19 Nov 2011 Location: United States
Online Status: Offline Posts: 68
Posted: 14 Aug 2012 at 13:59 | IP Logged
Okay, the only time you have to subtract bond interest
income and add bond interest expense is when they are
municipal bond and not treasury bonds. that's the key here.
the only time you add back the tax to the book income in
order to calculate tax income is when your corporation paid
federal and not state income tax. You may be from a
different country and do not understand that in the US
people and companies pay mostly two taxes, one is federal
and one is state. for corporations federal income tax is
not a deduction for tax purposes.
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Topic: R3- Please help me in this questio
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