Exam 24: Multistate Corporate Taxation

State Q has adopted sales-factor-only apportionment for its corporate income tax. As a result, a ____________________ (larger/smaller) percentage of an out-of-state corporation's income is assigned to tax in the state.

Indicate for each transaction whether a sales (S) or use (U) applies, or whether the transaction is nontaxable (N).Where the laws vary among various states, assume that the most common rules apply.All taxpayers are individuals.

The property factor includes land and buildings used for business purposes.

A ____________________ tax is designed to complement the local sales tax structure, to prevent the consumer from making purchases in a lower-tax state or online, and then bringing the asset into the state.

In determining a corporation's taxable income for state income tax purposes, which of the following does not constitute a subtraction from Federal income?

A few states assess a state-level tax on an S corporation that operates in the state.

Helene Corporation owns manufacturing facilities in States A, B, and C. A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted.B uses a three-factor apportionment formula under which sales are double-weighted.C employs a single-factor apportionment factor, based solely on sales. Helene's operations generated $1,000,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows. Helene's apportionable income assigned to A is:

Perez Corporation is subject to tax only in State A Perez generated the following income and deductions. Federal taxable income is the starting point in computing A taxable income.State income taxes are not deductible for A tax purposes.Perez's A taxable income is:

Flint Corporation is subject to a corporate income tax only in State X.The starting point in computing X taxable income is Federal taxable income.Flint's Federal taxable income is $750,000, which includes a $50,000 deduction for state income taxes.During the year, Flint received $10,000 interest on Federal obligations.X tax law does not allow a deduction for state income tax payments. Flint's taxable income for X purposes is:

The ____________________ tax usually is applied at the city or county level, as its main source of revenue.

Most states begin the computation of taxable income with an amount from the Federal income tax return.

When a _________________________ is in effect, out-of-state sales that are not subject to tax in the destination state are pulled back into the sales factor numerator of the origination state.

Troy, an S corporation, is subject to tax only in State A. On Schedule K of its Federal Form 1120S, Troy reported ordinary income of $2,000,000 from its business, municipal bond interest of $150,000, taxable interest of $150,000, and charitable contributions of $300,000.A does not recognize S status, but it does follow the Federal provisions with respect to the determination of taxable income for a corporation.Determine Troy's A taxable income.

Typically, the state's payroll factor ____________________ (does/does not) include the fringe benefits provided to its sales force.

List which items are included in the payroll factor of a state. Consider all forms of compensation that an employee might receive. Apply the general UDITPA rules.

Bulky Company sold an asset on the first day of the tax year for $500,000.Bulky's Federal tax basis for the asset was $300,000.Because of differences in cost recovery schedules, the state regular-tax basis in the asset was $375,000.What adjustment, if any, should be made to Bulky's Federal taxable income in determining the correct taxable income for the typical state?

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a State B office of an agency of the U.S. government. General has not established nexus with B. State A does not apply a throwback rule. In which state(s) will the sale be included in the sales factor numerator?

P.L.86-272 ____________________ (does/does not) create nexus when the sales representative also makes credit decisions before approving a sale at the customer's location.

Typically exempt from the sales/use tax base is the purchase by a symphony orchestra of printed music for its players.

A local business wants your help in making a decision about a large capital investment. Should your advice concentrate on tax or non-tax implications of the decision?