Holt Industries, Inc. does business in State 1.

That state uses federal taxable income as the starting point for calculating stare income tax. Interest on state obligations is taxed, but interest on federal obligations is not taxed. Only straight-line depreciation may be deducted. Holt Industries’ income and expenses for the year are:

What is Holt Industries’ taxable income for federal and state purposes?

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Sales Interest income on federal obligations Interest income on state obligations State taxes MACRS (straight-line depreciation) Cost of sales Other business expenses $200,000 $4,000 $5,000 $10,000 $15,000 $8,000 $60,000 $20,000