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Exam 24: Multistate Corporate Taxation

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Question 61

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A unitary business applies a combined apportionment formula,including data from operations of all of the affiliates.

A) True
B) False

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Question 62

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Ramirez Corporation is subject to tax only in State A.Ramirez generated the following income and deductions. Federal taxable income $500,000 State A income tax expense 45,000 Depreciation allowed for Federal tax purposes 300,000 Depreciation allowed for state tax purposes 250,000 ​ Federal taxable income is the starting point in computing A taxable income.State income taxes are not deductible for A tax purposes.Ramirez's A taxable income is:

A) $495,000.
B) $500,000.
C) $545,000.
D) $595,000.

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

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Question 63

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

Pail Corporation is a merchandiser.It purchases overstock garments from various suppliers and sells the goods in its State L retail store.Determine the total sales that are subject to the L consumer sales tax. Sales to L residents $600,000 Sales to homeless shelter operated by a local church 80,000 Sales to residents who cross the border from nearby State M 100,000 Sales to a similar merchandiser,located in another L town 20,000

Identify some state/local income tax issues facing pass-through entities such as S corporations,partnerships,and LLCs.

Match each of the following terms with the appropriate description, in the state income tax formul a. Apply the UDITPA rules in your responses. a.Addition modification b.Subtraction modification c.No modification -Federal general business credit.

Typically,corporate income taxes constitute about 20 percent of a state's annual tax collections.

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. State A State B State C Totals Sales $400,000 $800,000 $300,000 $1,500,000 Payroll 100,000 150,000 50,000 300,000 Property 200,000 200,000 200,000 600,000 ​ Helene's apportionable income assigned to A is:

Sylvia spends time working at the offices of her employer as a consultant to clients who are located in three different U.S.states.To which state(s)' payroll factor(s) is Sylvia's compensation assigned? Apply the general UDITPA rules.

Hill Corporation is subject to tax only in State X.Hill generated the following income and deductions.State income taxes are not deductible for X income tax purposes. Sales $5,000,000 Cost of sales 2,000,000 State X income tax expense 160,000 Depreciation allowed for Federal tax purposes 1,000,000 Depreciation allowed for state tax purposes 800,000 Interest income on Federal obligations 50,000 Interest income on X obligations 200,000 Expenses related to carrying X obligations 10,000 ​ a.​ The starting point in computing the State X income tax base is Federal taxable income.Derive this amount. b.​ Determine Hill's State X taxable income,assuming that interest on X obligations is exempt from State X income tax. c.​ Determine Hill's taxable income,assuming that interest on X obligations is subject to State X income tax.

In determining a corporation's taxable income for state income tax purposes,which of the following does not constitute a subtraction from Federal income?

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 -A garment purchased by a self-employed actress.

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. ​ State D State E Total Sales of paper products $4,500,000 $1,500,000 $6,000,000 Property 3,500,000 2,500,000 6,000,000 Payroll 1,500,000 1,000,000 2,500,000 ​ 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.

Zhao Company sold an asset on the first day of the tax year for $500,000.Zhao's Federal tax basis for the asset was $300,000.Because of differences in cost recovery schedules,the state regular-tax basis in the asset was $350,000.What adjustment,if any,should be made to Zhao's Federal taxable income in determining the correct taxable income for the typical 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. State A State B Totals Sales $200,000 $600,000 $800,000 Payroll 100,000 50,000 150,000 Property 200,000 50,000 250,000 ​ 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?

The use tax is designed to complement the sales tax.A use tax typically covers purchases made out of state and brought into the jurisdiction.

Almost all of the states assess some form of consumer-level sales/use tax.

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

Typically,the state's payroll factor ____________________ (does/does not) include the salaries and bonuses paid to its corporate executives.

If a state follows Federal income tax rules,the state's tax compliance and enforcement become easier to accomplish.