Question 1

In the United States, corporations are subject only to taxes imposed by the federal government.

Accepted Answer

A) True 
 B)False

Question 2

Supplies, Inc. does business in Georgia (6% tax rate) and Alabama (5% tax rate). All other factors being equal, the company will reduce state taxes if it increases the compensation paid to its employees in Alabama.

Accepted Answer

A) True 
 B)False

Question 3

The deemed paid foreign tax credit is available only to U.S. corporations that own 30% or more of the voting stock of a foreign corporation that paid dividends during the taxable year.

Accepted Answer

A) True 
 B)False

Question 4

This year, Plateau, Inc.'s before-tax income was $4,765,000. Plateau paid $310,000 income tax to state A and $130,000 income tax to state
B.a.Compute Plateau's federal taxable income and tax liability.

Accepted Answer

a. Federal taxable income: $4,

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

The foreign tax credit is available for income taxes paid to a foreign country.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about income tax treaties is false?

Accepted Answer

A) An income tax treaty is a bilateral agreement between the governments of two countries defining and limiting each country's respective tax jurisdiction. 
B) The provisions of income tax treaties pertain only to individuals and corporations that are residents of either treaty country. 
C) Under a typical treaty, the non-resident country would only tax a firm's profits if the firm maintained a permanent establishment in that country. 
D) Under a typical treaty, a firm's profits would be allocated to the countries in a manner similar to the apportionment of income among states under the UDITPA formula. 
A) An income tax treaty is a bilateral agreement between the governments of two countries defining and limiting each country's respective tax jurisdiction. 
B) The provisions of income tax treaties pertain only to individuals and corporations that are residents of either treaty country. 
C) Under a typical treaty, the non-resident country would only tax a firm's profits if the firm maintained a permanent establishment in that country. 
D) Under a typical treaty, a firm's profits would be allocated to the countries in a manner similar to the apportionment of income among states under the UDITPA formula.

Question 8

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 9

Article 1 of the U.S. Constitution, referred to as the commerce clause, prohibits a state from charging an extra 10 cent tax per gallon on gasoline sold to trucks with out-of-state license plates.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) Income from a foreign branch office is reported on the consolidated U.S.income tax return. 
B) Income from foreign operations conducted through a domestic subsidiary is reported on the consolidated U.S.income tax return. 
C) Income from foreign operations conducted through a foreign subsidiary is reported on the consolidated U.S.income tax return. 
D) Dividends received by a U.S.multinational corporation from a foreign subsidiary are reported on the consolidated U.S.income tax return. 
A) Income from a foreign branch office is reported on the consolidated U.S.income tax return. 
B) Income from foreign operations conducted through a domestic subsidiary is reported on the consolidated U.S.income tax return. 
C) Income from foreign operations conducted through a foreign subsidiary is reported on the consolidated U.S.income tax return. 
D) Dividends received by a U.S.multinational corporation from a foreign subsidiary are reported on the consolidated U.S.income tax return.

Question 11

Cambridge, Inc. conducts business in states X and Y. This year, its before-tax income was $150,000. Below is information regarding its sales, payroll, and property factors in both states.   Both states apply an equally-weighted three-factor formula to apportion income. State X has a 10% corporate income tax and state Y has a 5% corporate income tax. Compute the state tax savings if Cambridge could relocate $100,000 of property and $50,000 of payroll from state X to state Y.

Accepted Answer

A) $2,250 
B) $12,563 
C) $11,532 
D) $9,094 
A) $2,250 
B) $12,563 
C) $11,532 
D) $9,094

Question 12

Lexington Corporation conducts business in four states. In state A, its sales factor is 50%, its payroll factor is 14%, and its property factor is 29%. State A uses an equally-weighted three-factor apportionment formula, but plans to change to a formula that double-weight the sales factor. Which is of the following statements is true?

Accepted Answer

A) Lexington's tax liability to state A will increase. 
B) Any increase in Lexington's tax liability to state A will be offset by a decline in tax liability to other states. 
C) Lexington's tax liability to state A will decrease. 
D) Lexington's tax liability to state A will be unaffected by this change. 
A) Lexington's tax liability to state A will increase. 
B) Any increase in Lexington's tax liability to state A will be offset by a decline in tax liability to other states. 
C) Lexington's tax liability to state A will decrease. 
D) Lexington's tax liability to state A will be unaffected by this change.

Question 13

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?

Accepted Answer

A) $100,000 
B) $600,000 
C) $300,000 
D) $0 
A) $100,000 
B) $600,000 
C) $300,000 
D) $0

Question 14

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 15

San Carlos Corporation, a U.S. multinational, had pretax U.S. source income and foreign source income as follows.   San Carlos paid $100,000 income tax to Country W. Calculate San Carlos' tax savings if it takes a foreign tax credit rather than deducting this tax.

Accepted Answer

A) $100,000 
B) $66,000 
C) $34,000 
D) $0 
A) $100,000 
B) $66,000 
C) $34,000 
D) $0

Question 16

A bilateral agreement between the governments of England and France defining and limiting each party's respective tax jurisdiction is an example of a tax treaty.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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) $24,000 
B) $136,000 
C) $131,600 
D) $127,840 
A) $24,000 
B) $136,000 
C) $131,600 
D) $127,840

Question 19

World Sales, Inc., a U.S. multinational, had pretax U.S. source income and foreign source income as follows.   World Sales paid $50,000 income taxes to Country O. What is World Sale's U.S. tax liability if it deducts the foreign taxes paid?

Accepted Answer

A) $213,000 
B) $204,000 
C) $221,000 
D) $238,000 
A) $213,000 
B) $204,000 
C) $221,000 
D) $238,000

Question 20

A corporation is usually subject to tax by any state in which it engages in any business transactions.

Accepted Answer

A) True 
 B)False

In the United States, corporations are subject only to taxes imposed by the federal government.

Supplies, Inc. does business in Georgia (6% tax rate) and Alabama (5% tax rate). All other factors being equal, the company will reduce state taxes if it increases the compensation paid to its employees in Alabama.

The deemed paid foreign tax credit is available only to U.S. corporations that own 30% or more of the voting stock of a foreign corporation that paid dividends during the taxable year.

This year, Plateau, Inc.'s before-tax income was $4,765,000. Plateau paid $310,000 income tax to state A and $130,000 income tax to state B.a.Compute Plateau's federal taxable income and tax liability.

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.

The foreign tax credit is available for income taxes paid to a foreign country.

Which of the following statements about income tax treaties is false?

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?

Article 1 of the U.S. Constitution, referred to as the commerce clause, prohibits a state from charging an extra 10 cent tax per gallon on gasoline sold to trucks with out-of-state license plates.

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

San Carlos Corporation, a U.S. multinational, had pretax U.S. source income and foreign source income as follows. San Carlos paid $100,000 income tax to Country W. Calculate San Carlos' tax savings if it takes a foreign tax credit rather than deducting this tax.

A bilateral agreement between the governments of England and France defining and limiting each party's respective tax jurisdiction is an example of a tax treaty.

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

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.

World Sales, Inc., a U.S. multinational, had pretax U.S. source income and foreign source income as follows. World Sales paid $50,000 income taxes to Country O. What is World Sale's U.S. tax liability if it deducts the foreign taxes paid?

A corporation is usually subject to tax by any state in which it engages in any business transactions.

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 a Present Value of $1 B Present Value of Annuity of $1 C 2013 Income Tax Rates

Filters

Exam 13: Jurisdictional Issues in Business Taxation

In the United States, corporations are subject only to taxes imposed by the federal government.

Supplies, Inc. does business in Georgia (6% tax rate) and Alabama (5% tax rate). All other factors being equal, the company will reduce state taxes if it increases the compensation paid to its employees in Alabama.

The deemed paid foreign tax credit is available only to U.S. corporations that own 30% or more of the voting stock of a foreign corporation that paid dividends during the taxable year.

This year, Plateau, Inc.'s before-tax income was $4,765,000. Plateau paid $310,000 income tax to state A and $130,000 income tax to state B.a.Compute Plateau's federal taxable income and tax liability.

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.

The foreign tax credit is available for income taxes paid to a foreign country.

Which of the following statements about income tax treaties is false?

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?

Article 1 of the U.S. Constitution, referred to as the commerce clause, prohibits a state from charging an extra 10 cent tax per gallon on gasoline sold to trucks with out-of-state license plates.

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

San Carlos Corporation, a U.S. multinational, had pretax U.S. source income and foreign source income as follows. San Carlos paid $100,000 income tax to Country W. Calculate San Carlos' tax savings if it takes a foreign tax credit rather than deducting this tax.

A bilateral agreement between the governments of England and France defining and limiting each party's respective tax jurisdiction is an example of a tax treaty.

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

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.

World Sales, Inc., a U.S. multinational, had pretax U.S. source income and foreign source income as follows. World Sales paid $50,000 income taxes to Country O. What is World Sale's U.S. tax liability if it deducts the foreign taxes paid?

A corporation is usually subject to tax by any state in which it engages in any business transactions.

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 a Present Value of $1 B Present Value of Annuity of $1 C 2013 Income Tax Rates

Filters