For each of the following items considered independently, indicate whether the circumstances call for an addition modification (A), a subtraction modification (S), or no modification (N) in computing state taxable income. Then indicate the amount of any modification. The starting point in computing State Q taxable income is the year’s Federal taxable income, before any deduction for net operating losses.
a. Federal cost recovery = $10,000, and Q cost recovery = $15,000.
b. Federal cost recovery = $15,000, and Q cost recovery = $10,000.
c. Federal income taxes paid = $30,000.
d. Refund received from last year’s Q income taxes = $3,000.
e. Local property taxes, deducted on the Federal return as a business expense = $80,000.
f. Interest income from holding U.S. Treasury bonds = $5,000.
g. Interest income from holding Q revenue anticipation bonds = $3,000.
h. Interest income from State P school district bonds = $10,000.
i. Change in the excess of FIFO inventory valuation over the Federal LIFO amount = $6,000. Q does not allow the LIFO method.
j. An asset was sold for $18,000; its purchase price was $20,000. Accumulated Federal cost recovery = $15,000, and accumulated Q cost recovery = $8,000.
k. Dividend income received from State R corporation = $30,000, subject to a Federal dividends received deduction of 70%.