Exam 13: Jurisdictional Issues in Business Taxation

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.

Fleming Corporation, a U.S. multinational, has pretax U.S. source income and foreign source income as follows. Fleming paid $200,000 income tax to Country

The UDITPA formula for apportioning income among states is based on four equally weighted factors.

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

Which of the following statements about the foreign tax credit is true?

Section 482 of the Internal Revenue Code gives the IRS the authority to apportion or allocate gross income, deductions, or credits between/among related parties to correct any distortion resulting from unrealistic prices charged by members of the group to each other for goods or services.

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

In determining the portion of a firm's total income subject to a state's income tax, most states use an apportionment formula modeled after the Uniform Division of Income for Tax Purposes Act (UDITPA).

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?

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.

Koscil Inc. had the following taxable income. Koscil paid $315,000 foreign income tax. Compute its U.S. income tax liability

Which of the following statements about the Uniform Division of Income for Tax Purposes Act (UDITPA) is false?

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

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.

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

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. What is Lincoln's tax basis in its CFC stock at the end of the taxable year?

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

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.

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.