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Exam 24: Multistate Corporate Taxation

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Question 71

Multiple Choice

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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 an agency of the U.S. government. State A applies a throwback rule. In which state(s) will the sale be included in the sales factor numerator?

A) $0 in A.
B) $50,000 in A, with the balance exempted from other states' sales factors under the Colgate doctrine.
C) $100,000 in A.
D) In all of the states, according to the apportionment formulas of each, as the U.S. government is present in all states.

E) None of the above
F) All of the above

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Question 72

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Under P.L.86-272, which of the following transactions by itself would create nexus with a state?

A) Order solicitation for a plot of real estate, approved and filled from another state.
B) Order solicitation for a computer, approved and filled from another state.
C) Order solicitation for a machine, with credit approval from another state.
D) The conduct of a training seminar for sales personnel as to how to install and operate a new software product.

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

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Question 73

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

In unitary states, a(n) ____________________ provision permits a multinational corporation to elect to limit the reach of the state's taxing jurisdiction to activities occurring within the boundaries of the United States.

Simpkin 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. Simpkin'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. Simpkin's apportionable income assigned to B is:

Property taxes generally are collected by local taxing jurisdictions, not the state or Federal governments.

In most states, a taxpayer's income is apportioned on the basis of a formula measuring the extent of business contact, and allocated according to the location of property owned or used.

Nonbusiness income receives tax-exempt treatment under all state corporate income taxes.

Bobby and Sally work for the same employer, Wooster Manufacturing. Bobby manages the company's speculative investment portfolio, and Sally is a foreman in the factory. How are the salaries paid to Bobby and Sally treated in computing Wooster's payroll factor? Apply the general UDITPA rules.

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 M property factor is:

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

Federal taxable income is used as the starting point in computing the state's income tax base, but numerous state adjustments or modifications generally are required to:

The throwback rule requires that:

State and local politicians tend to apply new and increased taxes to taxpayers who are visitors to the jurisdiction, such as a tax on auto rentals, because the taxpayer cannot vote to reelect the lawmaker.

Slattery Corporation sells widgets in two states. State A levies a 9% effective tax rate, and State B levies a 4% rate. A and B have adopted sales-factor-only apportionment formulas. To reduce overall multistate income tax liabilities, Slattery should:

You are completing the State A income tax return for Quaint Company, LLC.Quaint operates in various states, showing the following results. In A, all interest is treated as business income.A uses a sales-only apportionment factor.Compute Quaint's A taxable income.

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

In international taxation, we discuss income sourcing rules and the permanent establishment doctrine. In multistate taxation, an analogous term might be the "ultimate destination concept." Define this term, and identify at least two of the most important exceptions to the general rule.

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:

Garcia Corporation is subject to tax in States G, H, and I.Garcia's compensation expense includes the following.