Exam 24: Multistate Corporate Taxation

Norman 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,Norman has rented 20% of its Y facility to an unaffiliated corporation.Norman generated $1,000,000 net rental income and $2,000,000 income from manufacturing. Norman is incorporated in Y.For X and Y purposes,rental income is classified as allocable nonbusiness income.By applying the statutes of each state,Norman determined that its apportionment factors are .75 for X and .25 for Y. Norman's income attributed to X is:

A unitary business is treated as a single entity for state tax purposes,with a combined apportionment formula including data from all of the operations of the business.

Only a few states require that Federal S corporations make a separate state-level election of the flow-through status.

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

José Corporation realized $600,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales,payroll,and property among the states include the following. Z utilizes a double-weighted sales factor in its three-factor apportionment formula.How much of José's taxable income is apportioned to Z?

Kurt Corporation realized $600,000 taxable income from the sales of its products in States X and Z.Kurt's activities establish nexus for income tax purposes in both states.Kurt's sales,payroll,and property among the states include the following. Z utilizes an equally weighted three-factor apportionment formula.Kurt is incorporated in X.How much of Kurt's taxable income is apportioned to Z?

The throwback rule requires that:

Garcia Corporation is subject to tax in States G,H,and I.Garcia's compensation expense includes the following. Officers' salaries are included in the payroll factor for G and H,but not for I.Compute Garcia's payroll factors for G,H,and I.

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

Almost all of the states tax a limited liability company as a ______________________________ entity for income tax purposes.

Overall tax liabilities will ____________________ (increase/decrease)if the members of a unitary group begin to include affiliates subject to higher effective tax rates.

Although apportionment formulas vary among jurisdictions,most states use a three-factor formula.The factors are ____________________,____________________,and ____________________.

Only compensation that is related to the production of ____________________ income is included in the payroll factor.

Typically exempt from the sales/use tax base is the purchase of seed and feed by a farmer.

Typically,a sales tax is applied to a ____________________ sale of tangible personal property.

Valdez Corporation,a calendar-year taxpayer,owns property in States M and O.Both M and O require that the average value of assets be included in the property factor.M requires that the property be valued at its historical cost,and O requires that the property be included in the property factor at its net depreciated book value. Valdez's O property factor is:

Define the terms allocation and apportionment as they are used in multistate income taxation.

Most states' consumer sales taxes apply directly to the final purchaser of the taxable asset,with the purchaser remitting the tax to the state treasury.

A local business wants your help in making a decision about a large capital investment.The entity has narrowed down the choice to four different locations,based on non-tax factors.How can you help them choose among the four finalists,concentrating on tax issues?