Question 1

Which of the following could result in a corporation having more than 100% of its income subject to state taxation?

Accepted Answer

A)  Some of the states in which the corporation conducts business have not adopted the Uniform Division of Income for Tax Purposes Act formula. 
B)  The states in which the corporation conducts business have adopted different definitions of the specific components of the UDITPA formula. 
C)  Some of the states in which the corporation conducts business strictly apply the UDITPA formula while others double-weight the sales factor. 
D)  All of these factors could result in a corporation having more than 100% of its income subject to state taxation. 
A)  Some of the states in which the corporation conducts business have not adopted the Uniform Division of Income for Tax Purposes Act formula. 
B)  The states in which the corporation conducts business have adopted different definitions of the specific components of the UDITPA formula. 
C)  Some of the states in which the corporation conducts business strictly apply the UDITPA formula while others double-weight the sales factor. 
D)  All of these factors could result in a corporation having more than 100% of its income subject to state taxation.

Question 2

The foreign tax credit can reduce a corporation's alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 3

Columbus Inc. owns 100 percent of the stock of Spania, a foreign corporation. All of Spania's income is foreign source, and its foreign income tax rate is 20 percent. This year, Spania distributed a $100,000 dividend to Columbus.
a. Assuming that Columbus is in the 35 percent tax bracket, compute its U.S. tax on the dividend.
b. How would your computation change if Spania's foreign income tax rate was 45 percent?

Accepted Answer

a. Columbus recognizes dividend income o

Question 4

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?

Accepted Answer

A)  Tradewinds manufactures costume jewelry in Bermuda and sells the jewelry to Larkin for distribution in the United States and Canada. 
B)  Tradewinds manufactures costume jewelry at its plant in Mexico and sells the jewelry to Larkin for distribution in the United States and Canada. 
C)  Tradewinds purchases costume jewelry from a related supplier in China and sells the jewelry at retail in Bermuda. 
D)  None of the above generates subpart F income. 
A)  Tradewinds manufactures costume jewelry in Bermuda and sells the jewelry to Larkin for distribution in the United States and Canada. 
B)  Tradewinds manufactures costume jewelry at its plant in Mexico and sells the jewelry to Larkin for distribution in the United States and Canada. 
C)  Tradewinds purchases costume jewelry from a related supplier in China and sells the jewelry at retail in Bermuda. 
D)  None of the above generates subpart F income.

Question 5

Foreign value-added taxes and excise taxes are eligible for the U.S. foreign tax credit.

Accepted Answer

A) True 
 B)False

Question 6

This year, Sutton Corporation's before-tax income was $2,000,000. It paid $175,000 income tax to Nebraska and $300,000 income tax to Iowa. Compute Sutton's federal income tax.

Accepted Answer

A)  $680,000 
B)  $518,500 
C)  $700,000 
D)  $533,750 
A)  $680,000 
B)  $518,500 
C)  $700,000 
D)  $533,750

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements concerning the nexus required for a state to tax income is false?

Accepted Answer

A)  Maryland has nexus if the corporate headquarters is located in Baltimore. 
B)  Company-owned trucks driving through Arizona to deliver goods to customers residing in California creates nexus in Arizona. 
C)  Maine has nexus if a company has retail outlets located in Maine malls. 
D)  A New York corporation can send traveling salespeople into Massachusetts to solicit orders for tangible goods without creating nexus in Massachusetts. 
A)  Maryland has nexus if the corporate headquarters is located in Baltimore. 
B)  Company-owned trucks driving through Arizona to deliver goods to customers residing in California creates nexus in Arizona. 
C)  Maine has nexus if a company has retail outlets located in Maine malls. 
D)  A New York corporation can send traveling salespeople into Massachusetts to solicit orders for tangible goods without creating nexus in Massachusetts.

Question 10

Jenkin Corporation reported the following for its first two taxable years.   Calculate Jenkin's U.S. tax liability for Year 2.

Accepted Answer

A)  $340,000 
B)  $240,000 
C)  $228,000 
D)  $204,000 
A)  $340,000 
B)  $240,000 
C)  $228,000 
D)  $204,000

Question 11

Southern, an Alabama corporation, has a $7 million excess FTC carryforward attributable to its foreign branch manufacturing operations. Which of the following strategies should increase Southern's use of its FTC carryforward to reduce U.S. tax?

Accepted Answer

A)  Southern could open a branch manufacturing operation in a foreign country with a 27% corporate income tax. 
B)  Southern could open a branch manufacturing operation in a foreign country with a 40% corporate income tax. 
C)  Southern could repatriate foreign source income in the form of dividends from its controlled subsidiary operating in a country with a 38% corporate income tax. 
D)  None of these strategies would increase the use of the FTC carryforward. 
A)  Southern could open a branch manufacturing operation in a foreign country with a 27% corporate income tax. 
B)  Southern could open a branch manufacturing operation in a foreign country with a 40% corporate income tax. 
C)  Southern could repatriate foreign source income in the form of dividends from its controlled subsidiary operating in a country with a 38% corporate income tax. 
D)  None of these strategies would increase the use of the FTC carryforward.

Question 12

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

Accepted Answer

A)  The foreign tax credit cannot exceed the U.S. tax on foreign source income. 
B)  Foreign tax credits in excess of the limit can be carried forward indefinitely. 
C)  Cross-crediting of taxes paid in high-tax and low-tax foreign jurisdictions can increase allowable foreign tax credits. 
D)  The foreign tax credit limitation is based on the ratio of foreign source income to total taxable income. 
A)  The foreign tax credit cannot exceed the U.S. tax on foreign source income. 
B)  Foreign tax credits in excess of the limit can be carried forward indefinitely. 
C)  Cross-crediting of taxes paid in high-tax and low-tax foreign jurisdictions can increase allowable foreign tax credits. 
D)  The foreign tax credit limitation is based on the ratio of foreign source income to total taxable income.

Question 13

Logan, an Indiana corporation, conducts its international business through 100% controlled foreign subsidiaries. This year, Logan's U.S. source taxable income was $5,431,000, and it received $12,250,000 dividends from its foreign subsidiaries. Logan paid no foreign income tax itself, but its subsidiaries paid foreign income tax at a 30% rate. Logan's U.S. income tax (35% rate) is:

Accepted Answer

A)  $6,188,350 
B)  $2,775,850 
C)  $1,900,850 
D)  $938,350 
A)  $6,188,350 
B)  $2,775,850 
C)  $1,900,850 
D)  $938,350

Question 14

Albany, Inc. does business in states C and D. State C uses an apportionment formula that double-weights the sales factor; state D apportions income using an equally-weighted three-factor formula. Albany's before tax income is $3,000,000, and its sales, payroll, and property factors are as follows.

Accepted Answer

A)  State C, $1,100,000; State D, $1,800,000 
B)  State C, $1,100,000; State D, $1,900,000 
C)  State C, $1,200,000; State D, $1,800,000 
D)  State C, $1,200,000; State D, $1,900,001 
A)  State C, $1,100,000; State D, $1,800,000 
B)  State C, $1,100,000; State D, $1,900,000 
C)  State C, $1,200,000; State D, $1,800,000 
D)  State C, $1,200,000; State D, $1,900,001

Question 15

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 16

Which of the following statements about subpart F income is false?

Accepted Answer

A)  Subpart F income is constructively repatriated to U.S. shareholders of a controlled foreign corporation (CF
C)  when earned. 
B)  Subpart F income has no commercial or economic connection to the CFC's home country. 
C)  Subpart F income includes income from the manufacture of goods in the CFC's home country. 
D)  Subpart F income includes income from the purchase of goods from a related party that are subsequently sold to another related party for use outside the CFC's home country. 
A)  Subpart F income is constructively repatriated to U.S. shareholders of a controlled foreign corporation (CF
C)  when earned. 
B)  Subpart F income has no commercial or economic connection to the CFC's home country. 
C)  Subpart F income includes income from the manufacture of goods in the CFC's home country. 
D)  Subpart F income includes income from the purchase of goods from a related party that are subsequently sold to another related party for use outside the CFC's home country.

Question 17

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.

Accepted Answer

A)  $1,000,000 
B)  $800,000 
C)  $1,400,000 
D)  $1,800,000 
A)  $1,000,000 
B)  $800,000 
C)  $1,400,000 
D)  $1,800,000

Question 18

Tri-State's, Inc. operates in Arkansas, Oklahoma, and Kansas. Assume that each state has adopted the UDITPA formula. During the corporation's tax year ended December 31, the apportionment data indicated:   Which of the following statements is true?

Accepted Answer

A)  The sales factor for Arkansas is approximately 35%. 
B)  Arkansas payroll percentage is approximately 11.1%. 
C)  The property factor for Arkansas is approximately 7.14%. 
D)  All of the above factors for Arkansas are correct. 
A)  The sales factor for Arkansas is approximately 35%. 
B)  Arkansas payroll percentage is approximately 11.1%. 
C)  The property factor for Arkansas is approximately 7.14%. 
D)  All of the above factors for Arkansas are correct.

Question 19

The foreign tax credit is available for both income and property taxes paid to a foreign jurisdiction.

Accepted Answer

A) True 
 B)False

Question 20

Global Corporation, a U.S. multinational, began operations this year. Global had pretax U.S. source income and foreign source income as follows.   Global paid $25,000 income tax to Country X. What is Global's U.S. tax liability if it takes the foreign tax credit?

Accepted Answer

A)  $247,000 
B)  $238,000 
C)  $222,000 
D)  $272,000 
A)  $247,000 
B)  $238,000 
C)  $222,000 
D)  $272,000

Which of the following could result in a corporation having more than 100% of its income subject to state taxation?

The foreign tax credit can reduce a corporation's alternative minimum tax.

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?

Foreign value-added taxes and excise taxes are eligible for the U.S. foreign tax credit.

This year, Sutton Corporation's before-tax income was $2,000,000. It paid $175,000 income tax to Nebraska and $300,000 income tax to Iowa. Compute Sutton's federal income tax.

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

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

Which of the following statements concerning the nexus required for a state to tax income is false?

Jenkin Corporation reported the following for its first two taxable years. Calculate Jenkin's U.S. tax liability for Year 2.

Southern, an Alabama corporation, has a $7 million excess FTC carryforward attributable to its foreign branch manufacturing operations. Which of the following strategies should increase Southern's use of its FTC carryforward to reduce U.S. tax?

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

Albany, Inc. does business in states C and D. State C uses an apportionment formula that double-weights the sales factor; state D apportions income using an equally-weighted three-factor formula. Albany's before tax income is $3,000,000, and its sales, payroll, and property factors are as follows.

Economic nexus:

Which of the following statements about subpart F income is false?

Tri-State's, Inc. operates in Arkansas, Oklahoma, and Kansas. Assume that each state has adopted the UDITPA formula. During the corporation's tax year ended December 31, the apportionment data indicated: Which of the following statements is true?

The foreign tax credit is available for both income and property taxes paid to a foreign jurisdiction.

Global Corporation, a U.S. multinational, began operations this year. Global had pretax U.S. source income and foreign source income as follows. Global paid $25,000 income tax to Country X. What is Global's U.S. tax liability if it takes the foreign tax credit?

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

Which of the following could result in a corporation having more than 100% of its income subject to state taxation?

The foreign tax credit can reduce a corporation's alternative minimum tax.

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?

Foreign value-added taxes and excise taxes are eligible for the U.S. foreign tax credit.

This year, Sutton Corporation's before-tax income was $2,000,000. It paid $175,000 income tax to Nebraska and $300,000 income tax to Iowa. Compute Sutton's federal income tax.

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

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

Which of the following statements concerning the nexus required for a state to tax income is false?

Jenkin Corporation reported the following for its first two taxable years. Calculate Jenkin's U.S. tax liability for Year 2.

Southern, an Alabama corporation, has a $7 million excess FTC carryforward attributable to its foreign branch manufacturing operations. Which of the following strategies should increase Southern's use of its FTC carryforward to reduce U.S. tax?

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

Albany, Inc. does business in states C and D. State C uses an apportionment formula that double-weights the sales factor; state D apportions income using an equally-weighted three-factor formula. Albany's before tax income is $3,000,000, and its sales, payroll, and property factors are as follows.

Economic nexus:

Which of the following statements about subpart F income is false?

Tri-State's, Inc. operates in Arkansas, Oklahoma, and Kansas. Assume that each state has adopted the UDITPA formula. During the corporation's tax year ended December 31, the apportionment data indicated: Which of the following statements is true?

The foreign tax credit is available for both income and property taxes paid to a foreign jurisdiction.

Global Corporation, a U.S. multinational, began operations this year. Global had pretax U.S. source income and foreign source income as follows. Global paid $25,000 income tax to Country X. What is Global's U.S. tax liability if it takes the foreign tax credit?

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