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Exam 15: Multistate Corporate Taxation

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Question 71

Multiple Choice

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A taxpayer wishing to reduce the negative tax effects of the application of the unitary theory might:

A) affiliate with a service division, like one in marketing.
B) add a profitable entity to the unitary group.
C) disengage unitary operations with the most profitable affiliates.
D) a and c
E) All of the above.

F) B) and C)
G) A) and B)

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Question 72

Multiple Choice

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Net Corporation's sales office and manufacturing plant are located in State X.Net also maintains a manufacturing plant and sales office in State W.For purposes of apportionment,X defines payroll as all compensation paid to employees,including contributions to § 401(k) deferred compensation plans.Under the statutes of W,neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor.Net incurred the following personnel costs. Net's payroll factor for State W is:

A) 0%.
B) 21.05%.
C) 28.57%.
D) 50.00%.

E) A) and B)
F) B) and C)

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Question 73

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In determining taxable income for state income tax purposes,state income tax refunds typically constitute a(n)____________________ modification.

Typically exempt from the sales/use tax base is the purchase of seed and feed by a farmer.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a.Taxable b.Not taxable -Prescription drugs

Almost all of the states tax a limited liability company as a ____________________ entity for income tax purposes.

In computing the property factor,property owned by the corporation typically is valued at its ____________________,plus the cost of additions and improvements,but without adjusting for ____________________.

Helene Corporation owns manufacturing facilities in States A,B,and C.A uses a three-factor apportionment formula under which the sales,property and payroll factors are equally weighted.B uses a three-factor apportionment formula under which sales are double-weighted.C employs a single-factor apportionment factor,based solely on sales. Helene's operations generated $1,000,000 of apportionable income,and its sales and payroll activity and average property owned in each of the three states is as follows. Helene's apportionable income assigned to A is:

The benefits of a passive investment company typically include:

A few states recognize an entity's S corporation status,such that taxable income flows through directly to shareholders,but they still assess a state-level tax on the entity.

Leased property,when included in the property factor,usually is valued at ____________________ times its annual rental,less any subrentals.

State A applies a throwback rule,but State B does not.General Corporation is taxable in a number of states and made a $100,000 sale from its A headquarters to a customer in B.This activity is not sufficient for General to create nexus with B.In which state(s) will the sale be included in the sales factor numerator?

State B applies a throwback rule,but State A does not.General Corporation is taxable in a number of states and made a $100,000 sale from its A headquarters to a customer in B.This activity is not sufficient for General to create nexus with B.In which state(s) will the sale be included in the sales factor numerator?

Node Corporation is subject to tax only in State X.Node generated the following income and deductions.State income taxes are not deductible for X income tax purposes. a.The starting point in computing the X income tax base is Federal taxable income. Derive this amount. b.Determine Node's X taxable income, assuming that interest on X obligations is exempt from X income tax. c.Determine Node's taxable income, assuming that interest on X obligations is subject to X income tax.

-Tripp Corporation owns manufacturing facilities in States A,B,and C.A uses a three-factor apportionment formula under which the sales,property and payroll factors are equally weighted.B uses a three-factor apportionment formula under which sales are double-weighted.C employs a single-factor apportionment factor,based solely on sales. Tripp's operations generated $1,000,000 of apportionable income,and its sales and payroll activity and average property owned in each of the three states is as follows. Tripp's apportionable income assigned to C is:

Double weighting the property factor effectively increases the tax burden on taxpayers based in the state,such as corporations with in-state headquarters.

Identify several transactions by business taxpayers where state and local tax issues are important.

Match each of the following terms with the appropriate description, in the state income tax formula. a.Addition modification b.Subtraction modification c.No modification -Federal ACE adjustment

The model law relating to the assignment of income among the states for corporations is:

Match each of the following terms with the appropriate description, in the state income tax formula. a.Addition modification b.Subtraction modification c.No modification -Treasury Bond interest income