Multistate Audit Technique Manual

CALIFORNIA FRANCHISE TAX BOARD Internal Procedures Manual Page 1 of 68Multistate Audit Technique Manual _______________________________________________________________________________ 5000 CALCULATION OF BUSINESS INCOME Once the auditor has identified the various components or entities involved in the unitary business (MATM 3000 et al.) and segregated the income or loss from nonbusiness activities (MATM 4000 et al.), the next step is to verify the business income reported by the taxpayer. In some cases, such as when the income reported by the taxpayer cannot be traced to any verifiable source or when the auditor is combining or decombining entities, it may be necessary for the auditor to reconstruct business income. This section of the manual will cover the various sources that may be used to verify business income and will provide guidance for performing a reconciliation of net income: Next, starting at MATM 5190, the discussion will turn to adjustments and special computations that may be required for calculating the business income reportable to California. Reviewed: December 2002 The information provided in the Franchise Tax Board's internal procedure manuals does not reflect changes in law, regulations, notices, decisions, or administrative procedures that may have been adopted since the manual was last updated CALIFORNIA FRANCHISE TAX BOARD Internal Procedures Manual Page 2 of 68Multistate Audit Technique Manual ...