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Exam 24: Multistate Corporate Taxation

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Question 71

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Judy,a regional sales manager,has her office in State X.Her region includes several states,as indicated in the sales report below.Determine how much of Judy's $200,000 compensation is assigned to the payroll factor of State X.

A) $0.
B) $66,667.
C) $80,000.
D) $200,000.

E) A) and C)
F) None of the above

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Question 72

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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 $2,500,000 from its business,municipal bond interest of $50,000,taxable interest of $100,000,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.

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Since A does not recognize S c...

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Question 73

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Bulky Company sold an asset on the first day of the tax year for $500,000.Bulky'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 $375,000.What adjustment,if any,should be made to Bulky's Federal taxable income in determining the correct taxable income for the typical state?

_________________________ is a means by which a corporation's business income is divided among the states in which it conducts business.

Typically,a sales/use tax is applied to a retail sale of ____________________ property.

Leased property,when included in the property factor,usually is valued at ____________________ times its annual rental,even though the taxpayer does not own the asset. or

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:

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. Helene's apportionable income assigned to A is:

Typically included in the sales/use tax base is the purchase of computer and cell phone equipment by a large consulting firm that is incorporated in the state.

A number of court cases in the last several decades have involved the application of a state's nexus rules concerning a business taxpayer.What is the significance of the term nexus when discussing state income taxation?

Kurt Corporation realized $900,000 taxable income from the sales of its products in States X and Z.Kurt's activities establish nexus for income tax purposes in both states.Kurt's sales,payroll,and property among the states include the following. Z utilizes an equally weighted three-factor apportionment formula.Kurt is incorporated in X.How much of Kurt's taxable income is apportioned to Z?

Summarize the principles of multistate tax planning.

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.

Double weighting the sales factor effectively increases the tax burden on taxpayers based in the state,such as corporations with in-state headquarters.

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.

Roughly forty percent of all taxes paid by businesses in the U.S.are to state,local,and municipal jurisdictions.

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

The sale of a prescription medicine probably is exempt from sales/use tax under the _________________________ rule.

An ad valorem property tax is based on the asset's current ____________________.

Provide the required information for Wren Corporation,whose Federal taxable income totals $100 million.Wren apportions 60% of its business income to State C. Wren generates $10 million of nonbusiness income each year. Forty percent of that income is attributable to rentals of buildings located in C. Wren's business income this year totals $60 million.