Question

For a class C corporation in Louisiana, the amount of state income tax S is deductible on the federal return and the amount of federal income tax F is deductible on the state return. With $200,000 taxable income and a 30% federal tax rate, the federal tax is 0.30(200,000 - S). If the state tax rate is 6% then the state tax satisfies S = 0.06(200,000 - 0.30(200,000 - S)). Find the state tax S and the federal tax F.

Answer 1

S = 0.06(200,000 - 0.30(200,000 - S))

Start multiplying

S = 0.06(200,000 - 60000 + 0.3*S)
S = 12000 - 3600 + 0.018*S
0.982*S = 8400

S = 8554

F = 0.3(200000-8554)

Solve for F