Abstract The article presents a method to ease the burden involved in tax computations. The final state tax may be computed by computing a tentative federal tax on federal income before deduction of state tax. Compute a tentative state tax on state income reduced by the tentative federal tax. Quite frequently, the net income subject to federal tax is not the same as that subject to state tax. The deduction for contributions is limited to 5 per cent of the net income before contributions on federal corporation returns, similar limitations exist under state laws. A slight modification is required if a corporation has capital gains or dividend credits, and is subject to the limitation on contributions. In that case the effective rate cannot be used in computing the tentative Federal tax, instead 5 per cent of the total income before contributions is to be deducted from income, taxable at ordinary rates, and the nominal rate is applied to the balance, but the correction factor is computed by using the effective rate. The method provided is an improvement over the familiar trial-and-error method.
Stephen Fired (Fri,) studied this question.