Question 1

The benefits of a passive investment company typically include:

Accepted Answer

A)  Reduced state income taxes. 
B)  Isolation of the entity's portfolio income from taxation in other nonunitary states. 
C)  Exclusion of the subsidiary's portfolio income from the parent corporation's apportionment formula denominator in other nonunitary states. 
D)  All of the above are benefits. 
A)  Reduced state income taxes. 
B)  Isolation of the entity's portfolio income from taxation in other nonunitary states. 
C)  Exclusion of the subsidiary's portfolio income from the parent corporation's apportionment formula denominator in other nonunitary states. 
D)  All of the above are benefits.

Question 2

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected.
a. Taxable
b. Not taxable
-A new auto purchased in Europe and shipped by the driver to her home state in the U.S.

Accepted Answer

The answer of Match each of the following items with...

Question 3

Under P.L. 86-272, the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 4

Hill Corporation is subject to tax only in State X. Hill generated the following income and deductions. State income taxes are not deductible for X income tax purposes.
   
a. The starting point in computing the State X income tax base is Federal taxable income. Derive this amount.
b. Determine Hill's X taxable income, assuming that interest on X obligations is exempt from State X income tax.
c. Determine Hill's taxable income, assuming that interest on X obligations is subject to State X income tax.

Accepted Answer

a. Sales $5,000,000
Cost of sales -2,000

Question 5

All of the U.S. states use an apportionment formula based on the sales, property, and payroll factors.

Accepted Answer

A) True 
 B)False

Question 6

Parent and Junior form a unitary group of corporations. Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%. Acting in concert to reduce overall tax liabilities, the group should:

Accepted Answer

A)  Execute an intercompany loan, such that Junior pays deductible interest to Parent. 
B)  Have Parent charge Junior an annual management fee. 
C)  Shift Parent's high­cost assembly and distribution operations to Junior. 
D)  All of the above are effective income-shifting techniques for a unitary group. 
E)  None of the above is an effective income-shifting technique for a unitary group. 
A)  Execute an intercompany loan, such that Junior pays deductible interest to Parent. 
B)  Have Parent charge Junior an annual management fee. 
C)  Shift Parent's high­cost assembly and distribution operations to Junior. 
D)  All of the above are effective income-shifting techniques for a unitary group. 
E)  None of the above is an effective income-shifting technique for a unitary group.

Question 7

The individual seller of a used auto should collect and remit sales tax to the state.

Accepted Answer

A) True 
 B)False

Question 8

You are completing the State A income tax return for Quaint Company, LLC. Quaint operates in various states, showing the following results.
   In A, all interest is treated as business income. A uses a sales­only apportionment factor. Compute Quaint's A
taxable income.

Accepted Answer

LLCs allocate and apportion state taxabl

Question 9

The typical local property tax falls on both an investor's principal residence and her stock portfolio.

Accepted Answer

A) True 
 B)False

Question 10

In the broadest application of the unitary theory, the U.S. unitary business files a combined tax return using factors and income amounts for all affiliates:

Accepted Answer

A)  Organized in the U.S. 
B)  Organized in NAFTA countries. 
C)  Organized anywhere in the world. 
D)  As dictated by the tax treaties between the U.S. and the other countries. 
A)  Organized in the U.S. 
B)  Organized in NAFTA countries. 
C)  Organized anywhere in the world. 
D)  As dictated by the tax treaties between the U.S. and the other countries.

Question 11

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's "garage sale."

Accepted Answer

A) True 
 B)False

Question 12

Bobby and Sally work for the same employer, Wooster Manufacturing, which makes brushes for artists and painters. Bobby spends one­half of his time managing the company's speculative investment portfolio, and the other half working with the corporate treasurer in securing cash flow for manufacturing payrolls. Sally is a foreman in the brush factory.
How are the salaries paid to Bobby and Sally treated in computing Wooster's payroll factor? Apply the general UDITPA rules.

Accepted Answer

Only compensation that is related to the

Question 13

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.

Accepted Answer

The answer of When a is in effect, out-of-state sales...

Question 14

Which of the following is not immune from state income taxation, even if P.L. 86-272 is in effect?

Accepted Answer

A)  Sale of office equipment that is used in the taxpayer's business. 
B)  Sale of office equipment that constitutes inventory to the purchaser. 
C)  Sale of a warehouse used in the taxpayer's business. 
D)  All of the above are protected by P.L. 86-272 immunity provisions. 
A)  Sale of office equipment that is used in the taxpayer's business. 
B)  Sale of office equipment that constitutes inventory to the purchaser. 
C)  Sale of a warehouse used in the taxpayer's business. 
D)  All of the above are protected by P.L. 86-272 immunity provisions.

Question 15

In states, a(n) election permits a multinational corporation to elect to limit the reach of the state's taxing jurisdiction to activities occurring within the boundaries of the United States.

Accepted Answer

unitary, w

Question 16

Adams Corporation owns and operates two manufacturing facilities, one in State X and the other in State Y. Due to a temporary decline in the corporation's sales, Adams has rented 20% of its Y facility to an unaffiliated corporation. Adams generated $1,000,000 net rental income and $5,000,000 income from manufacturing. Adams is incorporated in Y. For X and Y purposes, rental income is classified as allocable nonbusiness income. By applying the statutes of each state, Adams determined that its apportionment factors are .65 for X and .35 for Y.
Adams's income attributed to X is:

Accepted Answer

A)  $0. 
B)  $3,250,000. 
C)  $3,900,000. 
D)  $5,000,000. 
E)  $6,000,000. 
A)  $0. 
B)  $3,250,000. 
C)  $3,900,000. 
D)  $5,000,000. 
E)  $6,000,000.

Question 17

A service engineer spends 80% of her time maintaining the employer's productive business property and 20% maintaining the employer's nonbusiness rental properties. This year, her compensation totaled $90,000. The payroll factor assigns $90,000 to the state in which the employer is based.

Accepted Answer

A) True 
 B)False

Question 18

Under P.L. 86-272, which of the following transactions by itself would create nexus with a state?

Accepted Answer

A)  Order solicitation for a plot of real estate, approved and filled from another state. 
B)  Order solicitation for a computer, approved and filled from another state. 
C)  Order solicitation for a machine, with credit approval from another state. 
D)  The conduct of a training seminar for sales personnel as to how to install and operate a new software product. 
A)  Order solicitation for a plot of real estate, approved and filled from another state. 
B)  Order solicitation for a computer, approved and filled from another state. 
C)  Order solicitation for a machine, with credit approval from another state. 
D)  The conduct of a training seminar for sales personnel as to how to install and operate a new software product.

Question 19

describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an out­of­state entity's income.

Accepted Answer

The answer of describe(s) the degree of business activity that...

Question 20

Most of the U.S. states have adopted an alternative minimum tax, similar to the Federal system, in taxing the income of corporations.

Accepted Answer

A) True 
 B)False

The benefits of a passive investment company typically include:

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a. Taxable b. Not taxable -A new auto purchased in Europe and shipped by the driver to her home state in the U.S.

Under P.L. 86-272, the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of stocks and bonds.

All of the U.S. states use an apportionment formula based on the sales, property, and payroll factors.

Parent and Junior form a unitary group of corporations. Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%. Acting in concert to reduce overall tax liabilities, the group should:

The individual seller of a used auto should collect and remit sales tax to the state.

You are completing the State A income tax return for Quaint Company, LLC. Quaint operates in various states, showing the following results. In A, all interest is treated as business income. A uses a salesonly apportionment factor. Compute Quaint's A taxable income.

The typical local property tax falls on both an investor's principal residence and her stock portfolio.

In the broadest application of the unitary theory, the U.S. unitary business files a combined tax return using factors and income amounts for all affiliates:

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's "garage sale."

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.

Which of the following is not immune from state income taxation, even if P.L. 86-272 is in effect?

In states, a(n) election permits a multinational corporation to elect to limit the reach of the state's taxing jurisdiction to activities occurring within the boundaries of the United States.

A service engineer spends 80% of her time maintaining the employer's productive business property and 20% maintaining the employer's nonbusiness rental properties. This year, her compensation totaled $90,000. The payroll factor assigns $90,000 to the state in which the employer is based.

Under P.L. 86-272, which of the following transactions by itself would create nexus with a state?

describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an outofstate entity's income.

Most of the U.S. states have adopted an alternative minimum tax, similar to the Federal system, in taxing the income of corporations.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S: Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 16: Multistate Corporate Taxation

The benefits of a passive investment company typically include:

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a. Taxable b. Not taxable -A new auto purchased in Europe and shipped by the driver to her home state in the U.S.

Under P.L. 86-272, the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of stocks and bonds.

All of the U.S. states use an apportionment formula based on the sales, property, and payroll factors.

Parent and Junior form a unitary group of corporations. Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%. Acting in concert to reduce overall tax liabilities, the group should:

The individual seller of a used auto should collect and remit sales tax to the state.

You are completing the State A income tax return for Quaint Company, LLC. Quaint operates in various states, showing the following results. In A, all interest is treated as business income. A uses a sales­only apportionment factor. Compute Quaint's A taxable income.

The typical local property tax falls on both an investor's principal residence and her stock portfolio.

In the broadest application of the unitary theory, the U.S. unitary business files a combined tax return using factors and income amounts for all affiliates:

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's "garage sale."

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.

Which of the following is not immune from state income taxation, even if P.L. 86-272 is in effect?

In states, a(n) election permits a multinational corporation to elect to limit the reach of the state's taxing jurisdiction to activities occurring within the boundaries of the United States.

A service engineer spends 80% of her time maintaining the employer's productive business property and 20% maintaining the employer's nonbusiness rental properties. This year, her compensation totaled $90,000. The payroll factor assigns $90,000 to the state in which the employer is based.

Under P.L. 86-272, which of the following transactions by itself would create nexus with a state?

describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an out­of­state entity's income.

Most of the U.S. states have adopted an alternative minimum tax, similar to the Federal system, in taxing the income of corporations.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S: Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

You are completing the State A income tax return for Quaint Company, LLC. Quaint operates in various states, showing the following results. In A, all interest is treated as business income. A uses a salesonly apportionment factor. Compute Quaint's A taxable income.

describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an outofstate entity's income.