Exam 24: Multistate Corporate Taxation

In determining taxable income for state income tax purposes, interest income from another state's bonds typically constitutes a(n) modification.

You are completing the State A income tax return for Quaint Company, LLC. Quaint operates in various states with the following results: Ordinary income \ 800,000 Net capital loss (60,000) Interest income, IBM bond 40,000 In State A, all interest is treated as apportionable income. State A uses a sales-only apportionment factor. Compute Quaint's State A taxable income. State A All Other States Total Sales \ 800,000 \ 1,200,000 \ 2,000,000 Property (average cost) 250,000 2,000,000 2,250,000 Payroll 300,000 700,000 1,000,000

In applying the typical apportionment formula:

An assembly worker earns a $50,000 salary and receives a fringe benefit package worth $15,000. The payroll factor assigns $65,000 for this employee.

Under common terminology, a unitary group files a (combined/consolidated) state income tax return.

The sale of groceries to an individual probably is exempt from sales/use tax under the _________________________ rule.

Typically exempt from the sales/use tax base is a symphony orchestra's purchase of printed music for its musicians.

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its State A headquarters to a customer in State B. This activity is not sufficient for General to create nexus with State B. State A applies a throwback rule but State B does not. In which state(s) will the sale be included in the sales factor numerator?

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 State 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 State E capital stock tax. Cash \ 40 Payables \ 50 Receivables 20 Mortgages, principal 400 Fruinment net of accumulated depreciation 140 Common stock 10 Ruildings net of acrumulated depreciation 300 Additional pard-in capital 190 Land Retained earnings Total assets Total liabilities and equity

If a gift card is unused after a specified period of time, the state can collect the amount of the card proceeds from the seller as ____________________ property.

In most states, a limited liability company (LLC) is subject to the state income tax:

A service engineer spends 80% of her time maintaining the employer's productive business property and 20% maintaining the employer's nonbusiness rental properties. This year, her compensation totaled $90,000. The payroll factor assigns $90,000 to the state in which the employer is based.

A typical state taxable income subtraction modification is the interest income earned from another state's bonds.

Overall tax liabilities typically (increase/decrease) if the members of a unitary group begin to include affiliates that generate net operating losses.

Match each of the following terms with the appropriate description in the state income tax formula. Apply the UDITPA rules in your responses. -Treasury bond interest income.

Match each of the following terms with the appropriate description in the state income tax formula. Apply the UDITPA rules in your responses. -State-level NOL.

P.L. 86-272 (does/does not) create income tax nexus when the seller inserts advertising flyers into the Sunday newspaper that is sold in the state.

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.

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.

Cruz Corporation owns manufacturing facilities in States A, B, and C. State A uses a three-factor apportionment formula under which the sales, property, and payroll factors are equally weighted. State B uses a three-factor apportionment formula under which sales are double-weighted. State 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: State A State B State C Totals Sales \ 400,000 \ 800,000 \ 300,000 \ 1,500,000 Payroll 100,000 150,000 50,000 300,000 Property 200,000 200,000 200,000 600,000 Cruz's apportionable income assigned to State C is: