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Exam 24: Multistate Corporate Taxation

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Question 61

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Trayne Corporation's sales office and manufacturing plant are located in State X.Trayne 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 elective 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.Trayne incurred the following personnel costs. Trayne's payroll factor for State X is:

A) 100.00%.
B) 66.67%.
C) 62.50%.
D) 50.00%.

E) A) and B)
F) All of the above

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Question 62

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A typical state taxable income addition modification is for the state's NOL allowed the taxpayer for the tax year.

A) True
B) False

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Question 63

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The property factor includes land and buildings used for business purposes.

When the taxpayer operates in one or more unitary states:

____________________ describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an out-of-state entity's income.

Almost all of the states allow ____________________ treatment to an LLC for income tax purposes.

Parent Corporation owns all of the stock of Junior Corporation,a Delaware passive investment company.Parent operates strictly in nonunitary State B,which levies a 9% income tax.This year,Junior earned $200,000 of portfolio interest income and paid a $150,000 dividend to Parent.In which state(s) will the interest income create an income tax liability?

Parent and Minor form a non-unitary group of corporations.Parent is located in a state with an effective tax rate of 3%,while Minor's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities,the group should:

If a gift card is unused after a specified period of time,the state can collect the amount of the card proceeds from the seller,as ____________________ property.

Which of the following is not immune from state income taxation,even if P.L.86-272 is in effect?

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

Match each of the following events, considered independently, to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct. a.No change in apportionment factors b.Q apportionment factor increases c.Q apportionment factor decreases d.R apportionment factor increases e.R apportionment factor decreases f.S apportionment factor increases g.S apportionment factor decreases -Q adopts a throwback rule.

​In the income tax apportionment formula,market-sourcing the sales factor means that: ​

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice.In what areas might your Federal income tax knowledge also be applicable in your new assignment?

Milt Corporation owns and operates two facilities that manufacture paper products.One of the facilities is located in State D,and the other is located in State E.Milt generated $1,200,000 of taxable income,comprised of $1,000,000 of income from its manufacturing facilities and a $200,000 gain from the sale of nonbusiness property located in E.E does not distinguish between business and nonbusiness property.D apportions business income.Milt's activities within the two states are outlined below. ​ ​ Both D and E utilize a three-factor apportionment formula,under which sales,property,and payroll are equally weighted.Determine the amount of Milt's income that is subject to income tax by each state.

S corporations flow-through income amounts to its shareholders,and most states require a withholding of shareholder taxes on the allocated amounts.

Marquardt Corporation realized $900,000 taxable income from the sales of its products in States X and Z.Marquardt's activities establish nexus for income tax purposes in both states.Marquardt's sales,payroll,and property among the states include the following. Z utilizes an equally weighted three-factor apportionment formula.Marquardt is incorporated in X.How much of Marquardt's taxable income is apportioned to Z?

A typical state taxable income subtraction modification is the interest income earned from another state's bonds.

A taxpayer has nexus with a state for sales and use tax purposes if it has a physical presence in the state.

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 -Computing services purchased by a business.