Osprey Corporation, an accrual basis taxpayer, had taxable income for 2015 and p

Question

Osprey Corporation, an accrual basis taxpayer, had taxable income for 2015 and paid $40,000 on its estimated state income tax for the year. During 2015, the company received a $4,000 refund upon filing its 2014 state income tax return. The company filed its 2015 state income tax return in August 2016 and paid the $7,000 state income tax due for 2015. In December 2015, the company received a notice from the state tax commission that an additional $6,000 of income tax was due for 2013 because of an error on the return. The company acknowledged the error in December 2015 and paid the additional $6,000 in tax in February 2016. What is Osprey’s 2015 Federal income tax deduction for state income taxes?

Explanation / Answer

Osprey Corporation, can deduct state income taxes as business expenses =$40,000+$7,000

=$47,000

but they didn't get any deduction in prior year state income tax =$6,000

Corporation have rights to deduct the calenday year state income tax not having right to deduct prior tax year amount becuase it was calculate and deducted previously.

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