Exam 24: Multistate Corporate Taxation

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation. -Training administrative personnel to use an update to ordering software.

Public Law 86-272:

S corporations flow through income amounts to its shareholders, and most states require a withholding of shareholder taxes on the allocated amounts.

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 0.65 for X and 0.35 for Y. Adams's income attributed to X is:

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -Fees paid to an accounting firm for the conduct of a financial audit.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A garment purchased by an employee for wear at an office job.

Ramirez Corporation, which is subject to income tax only in State A, generated the following income and deductions: Federal taxable income \ 500,000 State A income tax expense 45,000 Depreciation allowed for Federal tax purposes 300,000 Depreciation allowed for state tax purposes 250,000 Federal taxable income is the starting point in computing A taxable income. State income taxes are not deductible for A tax purposes. Ramirez's A taxable income is:

Match each of the following terms with the appropriate description in the state income tax formula. Apply the UDITPA rules in your responses. -Federal depreciation deduction in excess of state amount.

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation. -Owning a tablet computer that is used on sales trips to the state.

Allocation is a method under which a corporation's taxable income is directly assigned to the specific states where the income is derived.

Typically included in the sales/use tax base is the purchase of tablet computers and cell phone equipment by a large manufacturing firm whose sales force uses the items.

A state can levy an income tax on a business only if the business was incorporated in the state.

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

A typical state taxable income addition modification is for the state's NOL allowed the taxpayer for the tax year.

The tax usually is applied at the city or county level as its main source of revenue.

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

In the broadest application of the unitary theory, the U.S. unitary business files a combined tax return using factors and income amounts for all affiliates:

Condor Corporation generated $450,000 of state taxable income from selling its product in States A and B. For the taxable year, the corporation's activities within the two states were as follows: State A State B Total Sales \ 800,000 \ 200,000 \ 1,000,000 Property 300,000 -0- 300,000 Payroll 200,000 800,000 1,000,000 Condor has determined that it is subject to tax in both States A and B. Both states utilize a three-factor apportionment formula that equally weights sales, property, and payroll. The rates of corporate income tax imposed in States A and B are 5% and 3%, respectively. Determine Condor's state income tax liability.

A state might levy a(n) tax when an investor sells shares of stock.