Pink Corporation Is an Accrual Basis Taxpayer That Uses the Recurring

question 22

Multiple Choice

Pink Corporation is an accrual basis taxpayer that uses the recurring item exception to the economic performance test for all relevant years. For 2018, the corporation's income subject to state income tax was $500,000 and the state corporate tax rate was 6%. During 2018, the corporation paid $24,000 on its estimated state income tax liability for that year. The remaining $6,000 of 2018 state income tax was paid in April 2019. In June 2018, the corporation paid $9,000 on its year 2017 state income tax liability, as a result of an audit of the 2017 return that was conducted in 2018. The company has elected to use the recurring item exception to economic performance. As a result of the above, the corporation should deduct in 2018 on its Federal income tax return state income taxes of:

• A) $24,000.
• B) $30,000.
• C) $33,000.
• D) $39,000.
• E) None of the above.

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