Question 1

In determining taxable income for state income tax purposes, interest income from Federal bonds typically constitutes an)_________ modification.

Accepted Answer

The answer of In determining taxable income for state income...

Question 2

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's garage sale.

Accepted Answer

A) True 
 B)False

Question 3

In determining a corporation's taxable income for state income tax purposes, which of the following does not constitute a subtraction modification from Federal income?

Accepted Answer

A)  Interest on U.S. obligations. 
B)  Expenses that are directly or indirectly related to state and municipal interest that is taxable for state purposes. 
C)  The amount by which the state depreciation deduction exceeds the corresponding Federal amount. 
D)  The amount by which the Federal depreciation deduction exceeds the corresponding state amount. 
A)  Interest on U.S. obligations. 
B)  Expenses that are directly or indirectly related to state and municipal interest that is taxable for state purposes. 
C)  The amount by which the state depreciation deduction exceeds the corresponding Federal amount. 
D)  The amount by which the Federal depreciation deduction exceeds the corresponding state amount.

Question 4

_________describes) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an out-of-state entity's income.

Accepted Answer

The answer of _________describes) the degree of business activity that...

Question 5

Most states begin the computation of corporate taxable income with an amount from the Federal income tax return.

Accepted Answer

A) True 
 B)False

Question 6

The benefits of a passive investment company employed in a nonunitary state typically include:

Accepted Answer

A)  Reduced state income taxes. 
B)  Isolation of the entity's portfolio income from taxation in other nonunitary states. 
C)  Exclusion of the subsidiary's portfolio income from the parent corporation's apportionment formula denominator in other nonunitary states. 
D)  All of these are benefits. 
A)  Reduced state income taxes. 
B)  Isolation of the entity's portfolio income from taxation in other nonunitary states. 
C)  Exclusion of the subsidiary's portfolio income from the parent corporation's apportionment formula denominator in other nonunitary states. 
D)  All of these are benefits.

Question 7

The most commonly used state income tax apportionment formula is:

Accepted Answer

A)  Sales factor only. 
B)  Sales factor double-weighted. 
C)  Sales factor equally weighted with property and payroll. 
D)  Payroll factor only. 
A)  Sales factor only. 
B)  Sales factor double-weighted. 
C)  Sales factor equally weighted with property and payroll. 
D)  Payroll factor only.

Question 8

Simpkin 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. Simpkin'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: $$\begin{array} { l r r r r } 
& \text { State A } & \text { State B } & \text { State C } & \text { Totals } \
\text { Sales } & \$ 400,000 & \$ 800,000 & \$ 300,000 & \$ 1,500,000 \
\text { Payroll } & 100,000 & 150,000 & 50,000 & 300,000 \
\text { Property } & 200,000 & 200,000 & 200,000 & 600,000
\end{array}$$ Simpkin's apportionable income assigned to State B is:

Accepted Answer

A)  $1,000,000 
B)  $533,333 
C)  $475,000 
D)  $0 
A)  $1,000,000 
B)  $533,333 
C)  $475,000 
D)  $0

Question 9

By making a water's edge election, a multinational taxpayer can limit the reach of unitary principles to the apportionment factors and income of its U.S. and E.U. affiliates.

Accepted Answer

A) True 
 B)False

Question 10

Bert Corporation, a calendar year taxpayer, owns property in States M and O. Both states require that the average value of assets be included in the property factor. State M requires that the property be valued at its historical cost, and State O requires that the property be included in the property factor at its net depreciated book value.

Accepted Answer

A)  75.0%. 
B)  66.7%. 
C)  64.9%. 
D)  64.5%. 
A)  75.0%. 
B)  66.7%. 
C)  64.9%. 
D)  64.5%.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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:

Accepted Answer

A)  $0. 
B)  $3,250,000. 
C)  $3,900,000. 
D)  $5,000,000. 
E)  $6,000,000. 
A)  $0. 
B)  $3,250,000. 
C)  $3,900,000. 
D)  $5,000,000. 
E)  $6,000,000.

Question 13

A taxpayer automatically has nexus with a state for sales and use tax purposes if it has income tax nexus with the same state.

Accepted Answer

A) True 
 B)False

Question 14

Double weighting the sales factor effectively decreases the corporate income tax burden on taxpayers based in a state such as entities with in-state headquarters.

Accepted Answer

A) True 
 B)False

Question 15

Hendricks Corporation sells widgets in two states. State A levies a 9% effective tax rate, and State B levies a 3% rate. A and B have adopted sales-factor-only apportionment formulas. To reduce overall multistate income tax liabilities, Hendricks should:

Accepted Answer

A)  Move its home office from B to A. 
B)  Remove all stored inventory from A. 
C)  Establish a personal training center in A. 
D)  Convert to employee status the independent contractors that it uses to sell widgets in A. 
A)  Move its home office from B to A. 
B)  Remove all stored inventory from A. 
C)  Establish a personal training center in A. 
D)  Convert to employee status the independent contractors that it uses to sell widgets in A.

Question 16

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.

Accepted Answer

The answer of If a gift card is unused after...

Question 17

Helene 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. Helene'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: $$\begin{array} { l r r r r } 
& \text { State A } & \text { State B } & \text { State C } & \text { Totals } \
\text { Sales } & \$ 400,000 & \$ 800,000 & \$ 300,000 & \$ 1,500,000 \
\text { Payroll } & 100,000 & 150,000 & 50,000 & 300,000 \
\text { Property } & 200,000 & 200,000 & 200,000 & 600,000
\end{array}$$ Helene's apportionable income assigned to State A is:

Accepted Answer

A)  $0 
B)  $266,667 
C)  $311,100 
D)  $1,000,000 
A)  $0 
B)  $266,667 
C)  $311,100 
D)  $1,000,000

Question 18

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.

Accepted Answer

A) Addition modification 
B) Subtraction modification 
C) No modification 
A) Addition modification 
B) Subtraction modification 
C) No modification

Question 19

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. General has not established nexus with State B. State A does not apply a throwback rule. In which states) will the sale be included in the sales factor numerator?

Accepted Answer

A)  In all of the states, according to the apportionment formulas of each, as the U.S. government is present in all states. 
B)  $100,000 in State A. 
C)  $100,000 in State B. 
D)  $0 in State A and $0 in State B. 
A)  In all of the states, according to the apportionment formulas of each, as the U.S. government is present in all states. 
B)  $100,000 in State A. 
C)  $100,000 in State B. 
D)  $0 in State A and $0 in State B.

Question 20

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 states) will the sale be included in the sales factor numerator?

Accepted Answer

A)  $0 in both State A and State B. 
B)  $100,000 in State A. 
C)  $100,000 in State B. 
D)  In both State A and State B, according to the apportionment formulas of each. 
A)  $0 in both State A and State B. 
B)  $100,000 in State A. 
C)  $100,000 in State B. 
D)  In both State A and State B, according to the apportionment formulas of each.

In determining taxable income for state income tax purposes, interest income from Federal bonds typically constitutes an)_________ modification.

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's garage sale.

In determining a corporation's taxable income for state income tax purposes, which of the following does not constitute a subtraction modification from Federal income?

_________describes) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an out-of-state entity's income.

Most states begin the computation of corporate taxable income with an amount from the Federal income tax return.

The benefits of a passive investment company employed in a nonunitary state typically include:

The most commonly used state income tax apportionment formula is:

By making a water's edge election, a multinational taxpayer can limit the reach of unitary principles to the apportionment factors and income of its U.S. and E.U. affiliates.

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

A taxpayer automatically has nexus with a state for sales and use tax purposes if it has income tax nexus with the same state.

Double weighting the sales factor effectively decreases the corporate income tax burden on taxpayers based in a state such as entities with in-state headquarters.

Hendricks Corporation sells widgets in two states. State A levies a 9% effective tax rate, and State B levies a 3% rate. A and B have adopted sales-factor-only apportionment formulas. To reduce overall multistate income tax liabilities, Hendricks should:

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.

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.

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operations, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 16: Multistate Corporate Taxation

In determining taxable income for state income tax purposes, interest income from Federal bonds typically constitutes an)_________ modification.

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's garage sale.

In determining a corporation's taxable income for state income tax purposes, which of the following does not constitute a subtraction modification from Federal income?

_________describes) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an out-of-state entity's income.

Most states begin the computation of corporate taxable income with an amount from the Federal income tax return.

The benefits of a passive investment company employed in a nonunitary state typically include:

The most commonly used state income tax apportionment formula is:

By making a water's edge election, a multinational taxpayer can limit the reach of unitary principles to the apportionment factors and income of its U.S. and E.U. affiliates.

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

A taxpayer automatically has nexus with a state for sales and use tax purposes if it has income tax nexus with the same state.

Double weighting the sales factor effectively decreases the corporate income tax burden on taxpayers based in a state such as entities with in-state headquarters.

Hendricks Corporation sells widgets in two states. State A levies a 9% effective tax rate, and State B levies a 3% rate. A and B have adopted sales-factor-only apportionment formulas. To reduce overall multistate income tax liabilities, Hendricks should:

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.

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.

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operations, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters