Exam 24: Multistate Corporate Taxation

Discuss how a multistate business divides its corporate taxable income among the states in which it operates. Hint: use the terms allocation and apportionment in your comments.

A capital stock tax usually is structured as an excise tax imposed on a corporation's net worth, using financial statement data to compute the tax.

Hopper Corporation's property holdings in State E are as follows: Item Property Factor Valuation (SM) Manufacturing equipment 100 Land held for potential appreciation 25 Manufacturing equipment that is not currently needed and sits idle 15 Manufacturing equipment that is not currently needed and is leased to another taxpayer 20 Compute the numerator of Hopper's E property factor.

Guilford Corporation is subject to franchise tax in State Z. The tax is imposed at a rate of 2.5% of the taxpayer's net worth that is apportioned to the state by use of a two-factor (sales and property equally weighted) formula. The property factor includes real and tangible personal property valued at net book value at the end of the taxable year. Of Guilford's sales, 60% are attributable to State Z, and $200,000 of the net book value of it's tangible personal property is located in State Z. Determine the State Z franchise tax payable by Guilford this year given the following end-of-the year balance sheet: Cash \1 00,000 Equipment \8 00,000 Accumulated Depreciation (200,000) 600,000 Furniture and Fixtures \1 50,000 Accumulated Depreciation (50,000) 100,000 Intangible Assets 200,000 Total Assets \1 ,000,000 Accounts and Taxes Payable \ 150,000 Long-term Debt 300,000 Common Stock 10,000 Additional Paid-in Capital 600,000 Retained Earnings Total Liabilities and Equity \ 1,000,000