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Exam 24: Multistate Corporate Taxation

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Question 1

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The throwback rule requires that:

A) Sales of tangible personal property are attributed to the state where they originated, if the taxpayer is not taxable in the state of destination.
B) When an asset is sold, any recognized gain from depreciation recapture is taxed at the rates that applied when the depreciation deductions were claimed.
C) Sales of services are attributed to the state of the seller's domicile.
D) Capital gain/loss is attributed to the state of the seller's domicile.

E) C) and D)
F) B) and C)

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Question 2

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General Corporation is taxable in a number of states.This year,General 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.State B applies a throwback rule,but State A does not.In which state(s) will the sale be included in the sales factor numerator?

A) $0 in A and $0 in B.
B) $100,000 in A.
C) $100,000 in B.
D) In both A and B, according to the apportionment formulas of each.

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

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Question 3

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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 and medicines purchased by a consumer.

Bert Corporation,a calendar-year taxpayer,owns property in States M and O.Both M and O require that the average value of assets be included in the property factor.M requires that the property be valued at its historical cost,and O requires that the property be included in the property factor at its net depreciated book value. ​ Bert's State M property factor is:

​Public Law 86-272: ​

Chipper Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z.Chipper's activities establish nexus for income tax purposes only in Z,the state of its incorporation.Chipper's sales,payroll,and property among the states include the following. ​ X utilizes a sales-only factor in its three-factor apportionment formula.How much of Chipper's taxable income is apportioned to X?

​Typically,state taxable income includes:

Cruz 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. Cruz'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. ​ Cruz's apportionable income assigned to C is:

Match each of the following items with the appropriate description, in applying the P. l. 86-272 definition of solicitation. a.More than solicitation, creates nexus b.Solicitation only, no nexus created -Carrying a free sample of a product to the customer's premises.

Under P.L.86-272,the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of stocks and bonds.

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.

The starting point in computing state taxable income generally is ____________________.

State Q wants to increase its income tax collections,but politically it would be unwise to raise taxes on in-state individuals or businesses.Q currently follows all UDITPA rules and employs an equally weighted three-factor apportionment formula.Q allocates nonbusiness income amounts. ​ Identify some changes to the income tax apportionment formula that would shift the scheduled income tax increases to out-of-state businesses.

Troy,an S corporation,is subject to tax only in State A.On Schedule K of its Federal Form 1120S,Troy reported ordinary income of $2,000,000 from its business,municipal bond interest of $150,000,taxable interest of $150,000,and charitable contributions of $300,000.A does not recognize S status,but it does follow the Federal provisions with respect to the determination of taxable income for a corporation.Determine Troy's A taxable income.

In most states,Federal S corporations must make a separate state-level election of the flow-through status.

In computing the property factor,property owned by the corporation typically is valued at its ____________________,but without adjusting for depreciation.

​Generally,nonapportionable income includes:

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 -R adopts an increase in its statutory corporate income tax rates.

Sales/use tax in most states applies to a restaurant meal.

General Corporation is taxable in a number of states.This year,General 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.State A applies a throwback rule,but State B does not.In which state(s) will the sale be included in the sales factor numerator?