Question 1

Economic nexus:

Accepted Answer

A)  May exist even though a firm has no physical presence in a state. 
B)  Does not create taxing jurisdiction under the Commerce Clause of the U.S. Constitution. 
C)  Requires a greater physical presence than traditional definitions of nexus. 
D)  Applies only to Internet business activities. 
A)  May exist even though a firm has no physical presence in a state. 
B)  Does not create taxing jurisdiction under the Commerce Clause of the U.S. Constitution. 
C)  Requires a greater physical presence than traditional definitions of nexus. 
D)  Applies only to Internet business activities.

Question 2

Harris Corporation's before-tax income was $400,000. It does business entirely in Pennsylvania, which has a 6% corporate income tax. Compute Harris' federal income tax.

Accepted Answer

A)  $84,000 
B)  $136,000 
C)  $102,960 
D)  $78,960 
A)  $84,000 
B)  $136,000 
C)  $102,960 
D)  $78,960

Question 3

Korn, Co. was incorporated in Delaware. It has production, distribution, and sales facilities in Kansas and Nebraska. All of Korn's customers reside in Kansas or Nebraska. Assume that both states use the UDITPA formula for apportionment of income. The corporation is investing in new equipment that cost $900,000. The equipment could be used in either the Kansas or Nebraska production facilities. Assume that Kansas' corporate income tax rate is 7% and Nebraska's is 8.5%. Should the equipment be placed in Kansas or Nebraska to minimize Korn's state income tax?

Accepted Answer

A)  Kansas. 
B)  Nebraska. 
C)  Either state, because state income tax will be unaffected by this choice. 
D)  Korn should place the equipment in a third state in which it does not have nexus. 
A)  Kansas. 
B)  Nebraska. 
C)  Either state, because state income tax will be unaffected by this choice. 
D)  Korn should place the equipment in a third state in which it does not have nexus.

Question 4

The United States has jurisdiction to tax income earned by any foreign corporation that is a controlled subsidiary of a U.S. parent corporation.

Accepted Answer

A) True 
 B)False

Question 5

Many Mountains, Inc. is a U.S. multinational corporation. This year, it had the following income. $\begin{array}{llr}
  \text {  U.S. source income} &&\$580,000\
 \text {  Eoreign source income:} &\
 \text {  Country x }&\$65,000\
 \text {Country Y  } &105,000&170,000\
 \text {  Total} &&\$750,000\

\end{array}$
 Many Mountains paid $15,000 income tax to Country X and $18,500 income tax to Country Y. Assume Many Mountains' foreign source income does not qualify as foreign-derived intangible income. 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 6

Chester, Inc., a U.S. multinational, earned $4 million this year from both domestic and international operations. Of this amount, $1.3 million qualifies as foreign-derived intangible income (FDII). If Chester pays no foreign income tax, compute its worldwide tax burden as a percentage of its pretax income.

Accepted Answer

A)  21% 
B)  14.18% 
C)  13.125% 
D)  18.44% 
A)  21% 
B)  14.18% 
C)  13.125% 
D)  18.44%

Question 7

A foreign branch operation of a U.S. corporation is not a separate legal entity.

Accepted Answer

A) True 
 B)False

Economic nexus:

Harris Corporation's before-tax income was $400,000. It does business entirely in Pennsylvania, which has a 6% corporate income tax. Compute Harris' federal income tax.

The United States has jurisdiction to tax income earned by any foreign corporation that is a controlled subsidiary of a U.S. parent corporation.

A foreign branch operation of a U.S. corporation is not a separate legal entity.

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

Economic nexus:

Harris Corporation's before-tax income was $400,000. It does business entirely in Pennsylvania, which has a 6% corporate income tax. Compute Harris' federal income tax.

The United States has jurisdiction to tax income earned by any foreign corporation that is a controlled subsidiary of a U.S. parent corporation.

A foreign branch operation of a U.S. corporation is not a separate legal entity.

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