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Exam 16: Multistate Corporate Taxation

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Question 61

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The benefits of a passive investment company typically include:

A) Reduced state income taxes.
B) Isolation of the entity's portfolio income from taxation in other nonunitary states.
C) Exclusion of the subsidiary's portfolio income from the parent corporation's apportionment formula denominator in other nonunitary states.
D) All of the above are benefits.

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

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Question 62

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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. 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. 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

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*Since the property for which ...

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Question 63

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Overall tax liabilities typically ____________________ (increase/decrease) if the members of a unitary group begin to include affiliates that generate net operating losses.

Several states allow the S corporation to file a(n) ____________________ income tax return, usually in the form of a state-by-state spreadsheet, on behalf of its out-of-state shareholders. or

Typically exempt from the sales/use tax base is the purchase of prescription medicines by an individual.

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a State B office of an agency of the U.S. government. General has not established nexus with B. State A does not apply a throwback rule. In which state(s) will the sale be included in the sales factor numerator?

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

Helene Corporation owns manufacturing facilities in States A, B, andC. 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:

Most states' consumer sales taxes apply directly to the final purchaser of the taxable asset, but the seller remits the tax to the state treasury.

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

Most of the U.S. states have adopted an alternative minimum tax, similar to the Federal system.

Pryce Corporation's property holdings in State E are as follows. Compute the numerator of Pryce's E property factor.

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 state sales tax usually falls upon:

A city might assess a recording tax when a business takes out a mortgage on its real estate.

The sales/use tax that is employed by most U.S. states does not fall on all retail transactions. Identify at least five sales/use tax exemptions that states often allow, eliminating certain transactions from the tax base.

By making a water's edge election, the multinational taxpayer can limit the reach of the unitary theory to U.S.-based factors and income.

Politicians use tax devices to create economic development incentives.

For most taxpayers, which of the traditional apportionment factors yields the greatest opportunities for tax reduction?

Boot Corporation is subject to income tax in States A andB. 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?