Question 1

Under the U.S.tax system,a domestic corporation pays U.S.tax only on the portion of its business income earned in the United States.

Accepted Answer

A) True 
 B)False

Question 2

BiState Inc.conducts business in North Carolina and South Carolina.If BiState's apportionment percentage in North Carolina is 63%,its apportionment percentage in South Carolina can be no more than 37%.

Accepted Answer

A) True 
 B)False

Question 3

Stockholm Imports Inc.,a U.S.multinational,received a $500,000 dividend from its foreign subsidiary in 2016.The subsidiary paid $112,000 foreign income tax with respect to this dividend.Stockholm's U.S.tax rate in 2016 was 34%.If Stockholm had no other foreign source income,compute its deemed paid foreign tax credit.

Accepted Answer

A) $208,080 
B) $112,000 
C) $58,000 
D) $0 
A) $208,080 
B) $112,000 
C) $58,000 
D) $0

Question 4

Lexington Corporation conducts business in four states.In state A,its sales factor is 50%,its payroll factor is 14%,and its property factor is 29%.State A uses an equally-weighted three-factor apportionment formula,but plans to change to a formula that double-weight the sales factor.Which is of the following statements is true?

Accepted Answer

A) Lexington's tax liability to state A will increase. 
B) Any increase in Lexington's tax liability to state A will be offset by a decline in tax liability to other states. 
C) Lexington's tax liability to state A will decrease. 
D) Lexington's tax liability to state A will be unaffected by this change. 
A) Lexington's tax liability to state A will increase. 
B) Any increase in Lexington's tax liability to state A will be offset by a decline in tax liability to other states. 
C) Lexington's tax liability to state A will decrease. 
D) Lexington's tax liability to state A will be unaffected by this change.

Question 5

The foreign subsidiaries of a U.S.corporation cannot be included in a U.S.consolidated tax return.

Accepted Answer

A) True 
 B)False

Question 6

A controlled foreign corporation is a foreign corporation in which U.S.shareholders own more than 50% of the voting power or stock value.

Accepted Answer

A) True 
 B)False

Question 7

The foreign tax credit is available for both income and property taxes paid to a foreign jurisdiction.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements concerning the taxation of a U.S.multinational corporation is true?

Accepted Answer

A) A U.S.corporation is taxed by the United States only on its U.S.source income. 
B) The foreign tax credit ensures that a U.S.corporation will never pay taxes at a higher rate than the one imposed by the U.S.tax law. 
C) Cross-crediting allows a U.S.corporation to maximize its foreign tax credit. 
D) The foreign tax credit allows a U.S.corporation to defer taxation of its foreign source income until the earnings are repatriated. 
A) A U.S.corporation is taxed by the United States only on its U.S.source income. 
B) The foreign tax credit ensures that a U.S.corporation will never pay taxes at a higher rate than the one imposed by the U.S.tax law. 
C) Cross-crediting allows a U.S.corporation to maximize its foreign tax credit. 
D) The foreign tax credit allows a U.S.corporation to defer taxation of its foreign source income until the earnings are repatriated.

Question 9

All states assessing an income tax use the same formula for apportionment purposes.

Accepted Answer

A) True 
 B)False

Question 10

San Carlos Corporation,a U.S.multinational,had pretax U.S.source income and foreign source income as follows:   San Carlos paid $60,000 income tax to Country W.Calculate San Carlos' tax savings if it takes a foreign tax credit rather than deducting this tax.

Accepted Answer

A) $100,000 
B) $66,000 
C) $47,400 
D) $0 
A) $100,000 
B) $66,000 
C) $47,400 
D) $0

Question 11

Multi-state businesses can reduce their overall tax cost to the extent they can shift income from a low-tax state to a high-tax state.

Accepted Answer

A) True 
 B)False

Question 12

Albany,Inc.does business in states C and D.State C uses an apportionment formula that double-weights the sales factor; state D apportions income using an equally-weighted three-factor formula.Albany's before tax income is $3,000,000,and its sales,payroll,and property factors are as follows.   Calculate Albany's income taxable in each state.

Accepted Answer

A) State C,$1,100,000; State D,$1,800,000. 
B) State C,$1,100,000; State D,$1,900,000. 
C) State C,$1,200,000; State D,$1,800,000. 
D) State C,$1,200,000; State D,$1,900,000. 
A) State C,$1,100,000; State D,$1,800,000. 
B) State C,$1,100,000; State D,$1,900,000. 
C) State C,$1,200,000; State D,$1,800,000. 
D) State C,$1,200,000; State D,$1,900,000.

Question 13

Many Mountains,Inc.is a U.S.multinational corporation.This year,it had the following income.   Many Mountains paid $15,000 income tax to Country X and $18,500 income tax to Country Y.Compute Many Mountains' allowable foreign tax credit.

Accepted Answer

A) $15,000 
B) $18,500 
C) $33,500 
D) $35,700 
A) $15,000 
B) $18,500 
C) $33,500 
D) $35,700

Question 14

Frost Inc.,a calendar year U.S.corporation,owns 20 percent of the stock of Snowflake,Inc.a calendar year specified foreign corporation.Prior to 2018,Snowflake has accumulated deferred foreign earnings of $30 million and zero aggregate foreign cash position.Compute Frost's tax liability on its mandatory inclusion amount related to its ownership of Snowflake.

Accepted Answer

A) $0 
B) $1,260,000 
C) $930,000 
D) $480,000 
A) $0 
B) $1,260,000 
C) $930,000 
D) $480,000

Question 15

A foreign source dividend received by a U.S.corporation after 2017 is eligible for the 50% dividends-received deduction.

Accepted Answer

A) True 
 B)False

Question 16

Lilly Inc.,a calendar year U.S.corporation,owns 40 percent of the stock of Holly,Inc.a calendar year specified foreign corporation.Prior to 2018,Holly has accumulated deferred foreign earnings of $11.2 million and an aggregate foreign cash position of $1.8 million.Compute Lilly's tax liability on its mandatory inclusion amount related to its ownership of Holly.

Accepted Answer

A) $412,400 
B) $694,400 
C) $940,800 
D) $1,031,000 
A) $412,400 
B) $694,400 
C) $940,800 
D) $1,031,000

Question 17

Fleming Corporation,a U.S.multinational,has pretax U.S.source income and foreign source income as follows:   Fleming paid $50,000 income tax to Country A.If Fleming takes the foreign tax credit,compute its worldwide tax burden as a percentage of its pretax income.

Accepted Answer

A) 21% 
B) 34% 
C) 33% 
D) 17.33% 
A) 21% 
B) 34% 
C) 33% 
D) 17.33%

Question 18

In the United States,corporations are subject only to taxes imposed by the federal government.

Accepted Answer

A) True 
 B)False

Question 19

Article 1 of the U.S.Constitution,referred to as the commerce clause,prohibits state governments from using a tax to discriminate against interstate commerce.

Accepted Answer

A) True 
 B)False

Question 20

Southern,an Alabama corporation,has a $7 million excess FTC carryforward attributable to its foreign branch manufacturing operations.Which of the following strategies should increase Southern's use of its FTC carryforward to reduce U.S.tax?

Accepted Answer

A) Southern could open a branch manufacturing operation in a foreign country with a 17% corporate income tax. 
B) Southern could open a branch manufacturing operation in a foreign country with a 40% corporate income tax. 
C) Southern could repatriate foreign source income in the form of dividends from its controlled subsidiary operating in a country with a 32% corporate income tax. 
D) None of these strategies would increase the use of the FTC carryforward. 
A) Southern could open a branch manufacturing operation in a foreign country with a 17% corporate income tax. 
B) Southern could open a branch manufacturing operation in a foreign country with a 40% corporate income tax. 
C) Southern could repatriate foreign source income in the form of dividends from its controlled subsidiary operating in a country with a 32% corporate income tax. 
D) None of these strategies would increase the use of the FTC carryforward.

Under the U.S.tax system,a domestic corporation pays U.S.tax only on the portion of its business income earned in the United States.

BiState Inc.conducts business in North Carolina and South Carolina.If BiState's apportionment percentage in North Carolina is 63%,its apportionment percentage in South Carolina can be no more than 37%.

The foreign subsidiaries of a U.S.corporation cannot be included in a U.S.consolidated tax return.

A controlled foreign corporation is a foreign corporation in which U.S.shareholders own more than 50% of the voting power or stock value.

The foreign tax credit is available for both income and property taxes paid to a foreign jurisdiction.

Which of the following statements concerning the taxation of a U.S.multinational corporation is true?

All states assessing an income tax use the same formula for apportionment purposes.

San Carlos Corporation,a U.S.multinational,had pretax U.S.source income and foreign source income as follows: San Carlos paid $60,000 income tax to Country W.Calculate San Carlos' tax savings if it takes a foreign tax credit rather than deducting this tax.

Multi-state businesses can reduce their overall tax cost to the extent they can shift income from a low-tax state to a high-tax state.

Many Mountains,Inc.is a U.S.multinational corporation.This year,it had the following income. Many Mountains paid $15,000 income tax to Country X and $18,500 income tax to Country Y.Compute Many Mountains' allowable foreign tax credit.

A foreign source dividend received by a U.S.corporation after 2017 is eligible for the 50% dividends-received deduction.

Fleming Corporation,a U.S.multinational,has pretax U.S.source income and foreign source income as follows: Fleming paid $50,000 income tax to Country A.If Fleming takes the foreign tax credit,compute its worldwide tax burden as a percentage of its pretax income.

In the United States,corporations are subject only to taxes imposed by the federal government.

Article 1 of the U.S.Constitution,referred to as the commerce clause,prohibits state governments from using a tax to discriminate against interstate commerce.

Southern,an Alabama corporation,has a $7 million excess FTC carryforward attributable to its foreign branch manufacturing operations.Which of the following strategies should increase Southern's use of its FTC carryforward to reduce U.S.tax?

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 13: Jurisdictional Issues in Business Taxation

Under the U.S.tax system,a domestic corporation pays U.S.tax only on the portion of its business income earned in the United States.

BiState Inc.conducts business in North Carolina and South Carolina.If BiState's apportionment percentage in North Carolina is 63%,its apportionment percentage in South Carolina can be no more than 37%.

The foreign subsidiaries of a U.S.corporation cannot be included in a U.S.consolidated tax return.

A controlled foreign corporation is a foreign corporation in which U.S.shareholders own more than 50% of the voting power or stock value.

The foreign tax credit is available for both income and property taxes paid to a foreign jurisdiction.

Which of the following statements concerning the taxation of a U.S.multinational corporation is true?

All states assessing an income tax use the same formula for apportionment purposes.

San Carlos Corporation,a U.S.multinational,had pretax U.S.source income and foreign source income as follows: San Carlos paid $60,000 income tax to Country W.Calculate San Carlos' tax savings if it takes a foreign tax credit rather than deducting this tax.

Multi-state businesses can reduce their overall tax cost to the extent they can shift income from a low-tax state to a high-tax state.

Many Mountains,Inc.is a U.S.multinational corporation.This year,it had the following income. Many Mountains paid $15,000 income tax to Country X and $18,500 income tax to Country Y.Compute Many Mountains' allowable foreign tax credit.

A foreign source dividend received by a U.S.corporation after 2017 is eligible for the 50% dividends-received deduction.

Fleming Corporation,a U.S.multinational,has pretax U.S.source income and foreign source income as follows: Fleming paid $50,000 income tax to Country A.If Fleming takes the foreign tax credit,compute its worldwide tax burden as a percentage of its pretax income.

In the United States,corporations are subject only to taxes imposed by the federal government.

Article 1 of the U.S.Constitution,referred to as the commerce clause,prohibits state governments from using a tax to discriminate against interstate commerce.

Southern,an Alabama corporation,has a $7 million excess FTC carryforward attributable to its foreign branch manufacturing operations.Which of the following strategies should increase Southern's use of its FTC carryforward to reduce U.S.tax?

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters