Exam 13: Jurisdictional Issues in Business Taxation

Lincoln Corporation,which has a 34% marginal tax rate,owns 50% of the stock of a controlled foreign corporation (CFC).At the beginning of the year,Lincoln's basis in its CFC stock was $100,000.The CFC's current-year income was $1 million,$600,000 of which was subpart F income.The CFC paid no foreign income tax and distributed no dividends.How much current taxable income must Lincoln report as a result of its ownership of the CFC?

Transfer prices cannot be used by U.S.corporations and their foreign affiliates to shift income between taxing jurisdictions.

Which of the following entities is not subject to U.S.federal income tax?

If Gamma Inc.is incorporated in Ohio and has its commercial domicile in Cleveland,the state of Ohio has jurisdiction to tax 100% of Gamma's business income.

BiState Inc.conducts business in North Carolina and South Carolina.If BiState's apportionment percentage in North Carolina is 63%,its apportionment percentage in South Carolina can be no more than 37%.

Tradewinds is a Bermuda corporation that is 100% owned by Larkin,a U.S.corporation.Which of the following transactions generates subpart F income for U.S.tax purposes?

The foreign subsidiaries of a U.S.corporation cannot be included in a U.S.consolidated tax return.

Which of the following statements about the foreign tax credit limitation is false?

The Quad affiliated group consists of Quad,a Delaware corporation,and its three wholly-owned subsidiaries.This year,the four corporations report the following net income (loss). If Quad elects to file a consolidated U.S.tax return,compute consolidated taxable income assuming that subsidiaries 1 and 2 are domestic corporations and subsidiary 3 is a foreign corporation.

Luttrix Inc.does business in Nebraska (6% tax rate)and Colorado (3% tax rate).All other factors being equal,Luttrix will reduce state taxes if it constructs a new manufacturing plant in Colorado.

The foreign tax credit is available only for foreign income,excise,value-added,sales,property and transfer taxes.

According to Public Law 86-272,the sale of tangible goods to residents of a state is not sufficient to establish nexus in that state.

The term "tax haven" refers to a foreign country that imposes an income tax at a rate higher than the U.S.rate.

Pennworth Corporation operates in the United States and foreign country M.Its domestic subsidiary Delco,Inc.operates in foreign country N.This year,the two corporations report the following.Corporate tax rate schedule. If Pennworth and Delco file a consolidated U.S.tax return,compute consolidated income tax liability.

GAAP-based consolidated financial statements include only income earned by the consolidated group's domestic subsidiaries.

Stockholm Imports Inc.,a U.S.multinational,received a $500,000 dividend from its foreign subsidiary.The subsidiary paid $112,000 foreign income tax with respect to this dividend.Stockholm's U.S.tax rate is 34%.If Stockholm has no other foreign source income,compute its deemed paid foreign tax credit.

Jenkin Corporation reported the following for its first two taxable years.Corporate tax rate schedule.Assume that the tax rates for both the years are same. Calculate Jenkin's U.S.tax liability for Year 2.

The payroll factor in the UDITPA state income tax apportionment formula always includes executive compensation.

Which of the following taxes is eligible for the foreign tax credit?

Which of the following statements about organizational forms for conducting foreign operations is false?