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Exam 16: Multijurisdictional Taxation

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Question 61

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Present, Inc., a U.S. corporation, owns 60% of the stock of Past, Inc., a foreign corporation. For the current year, Present receives a dividend of $80,000 from Past. Past's pools of E & P (after taxes) and foreign taxes are $4,000,000 and $500,000, respectively. What is Present's total gross income from this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

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Dividend income is "grossed up...

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Question 62

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Carol, a citizen and resident of Adagio, reports gross income that is effectively connected with a U.S. business. No deductions are allowed against this income, and Carol's U.S. tax rate is a flat 30 percent.

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Question 63

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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.

Boot Corporation is subject to income tax in States A and B. Boot's operations generated $200,000 of apportionable income, and its sales and payroll activity and average property owned in each of the states is as follows. ​ How much more (less) of Boot's income is subject to A income tax if, instead of using an equally-weighted three-factor apportionment formula, A uses a formula with a double-weighted sales factor?

An assembly worker earns a $50,000 salary and receives a fringe benefit package worth $15,000. The payroll factor assigns $65,000 for this employee.

Which of the following determinations requires knowing the amount of one's foreign-source gross income?

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

The U.S. system for taxing income earned inside its borders by non-U.S. persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

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

A tax haven often is:

Waldo, Inc., a U.S. corporation, owns 100% of Orion, Ltd., a foreign corporation. Orion earns only general basket income. During the current year, Orion paid Waldo a $5,000 dividend. The foreign tax credit associated with this dividend is $3,000. The foreign jurisdiction requires a withholding tax of 10%, so Waldo received only $4,500 in cash as a result of the dividend. What is Waldo's total U.S. gross income reported as a result of the $4,500 cash received?

OutCo, a controlled foreign corporation in Meena (located outside the U.S.) , earns $600,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies. All of the dividend payors are located in Meena. OutCo's Subpart F income for the year is:

A "U.S. shareholder" for purposes of CFC classification is any U.S. person who owns directly, indirectly, and constructively at least 50% of the voting power of a foreign corporation.

The property factor includes business assets that the taxpayer owns, but also those merely used under a lease agreement.

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S. parent, followed by:

Discuss how a multistate business divides up its corporate taxable income among the states in which it operates. Hint: use the terms allocation and apportionment in your comments.

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to the State B office of the FBI. In which state(s) will the sale be included in the sales factor numerator?

Which of the following is a principle used in applying the income-sourcing rules under U.S. tax law?

Which of the following determinations does not require knowing the amounts of one's U.S.- versus foreign-source income?