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Exam 24: Multistate Corporate Taxation

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Question 51

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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 -Computing services purchased by a business.

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Question 52

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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 -Groceries purchased by a consumer and taken home for meal preparation there.

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Question 53

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

Typically exempt from the sales/use tax base is the purchase of lumber by a do-it-yourself homeowner,when she builds a deck onto her patio.This exemption is known as the "homestead rule."

Adams Corporation owns and operates two manufacturing facilities,one in State X and the other in State Y.Due to a temporary decline in the corporation's sales,Adams has rented 20% of its Y facility to an unaffiliated corporation.Adams generated $1,000,000 net rental income and $5,000,000 income from manufacturing. ​ Adams is incorporated in Y.For X and Y purposes,rental income is classified as allocable nonbusiness income.By applying the statutes of each state,Adams determined that its apportionment factors are .65 for X and .35 for Y. ​ Adams's income attributed to X is:

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

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 new auto purchased in Europe and shipped by the driver to her home state in the U.S.

In most states,legal and accounting services are exempt from the sales/use tax base.

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

Typically exempt from the sales/use tax base is the purchase of tools by a manufacturer to make the widgets that it sells.

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 -Purchasing ads that show up on search-result screens for internet browsers.

A unitary group of entities files a combined return that includes all of the affiliates' income and apportionment data.

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 -WillCo completes the construction of production facilities in S.

The model law relating to the assignment of income among the states for corporations is:

Hambone Corporation is subject to the State E capital stock tax.The tax is levied at 2% of the entity's net worth that is apportioned to E.Hambone conducts 30% of its operations in State E.Hambone's current book balance sheet is as follows,with amounts in millions.Compute Hambone's liability for the E capital stock tax. Cash $ 40 Payables $ 50 Receivables 20 Mortgages,principal 400 Equipment,net of accumulated depreciation 140 Common stock 10 Buildings,net of accumulated depreciation 300 Additional paid-in capital 190 Land 250 Retained earnings 100 Total assets $750 Total liabilities and equity $750

Compost Corporation has finished its computation of Federal taxable income.In State Q,the derivation of state corporate taxable income starts with the Federal amount and makes a number of modifications.List at least five such modifications that Compost is likely to encounter.In this regard,follow the general UDITPA rules,and list both addition and subtraction modifications.

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.

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?

A typical U.S.state piggybacks its collections of the corporate income tax,by letting the Federal government collect and remit the corresponding tax to the state.

Usually a business chooses a location where it will build a new plant based chiefly on tax considerations.