Question 1

Kim Corporation, a calendar year taxpayer, has manufacturing facilities in States A and
B.A summary of Kim's property holdings follows.
  
  *Unrelated to Kim's regular business and operations.
Determine Kim's property factors for the two states. A's statutes provide that the average historical cost of business property is to be included in the property factor.B's statutes provide that the property factor is based on the average depreciated basis of in-state business property.

Accepted Answer

Kim Corporation's property factor is 61.90% for State A, and its property factor for State B is 44.53%.Under the statutes of A and B, nonbusiness property (i.e., the rental property) is not taken into consideration in computing the property factor.The basis for determining the average property in A is historical cost, whereas the value employed for B is depreciated cost.
HISTORICAL COST-EXCLUDING NONBUSINESS PROPERTY
Average Property in A
  Average Property in B
  Property Factor for A
DEPRECIATED BASIS-EXCLUDING NONBUSINESS ASSETS
Average property in A
   Average property in B
  Property factor for B

Question 2

Pail Corporation is a merchandiser.It purchases overstock garments from various suppliers and sells the goods in its State L retail store.Determine the total sales that are subject to the L consumer sales tax.

Accepted Answer

Pail must collect L sales tax on $700,000.No tax is collected from sales to charities, nor to other entities who will then re-sell the goods.The sales to M residents actually create an M use tax, as the goods presumably are worn by the customers in M.M residents should file a return to pay the M sales tax and then claim a credit for the payment actually made to L.Compliance with this cross-border result is very low.M might better enforce this rule if its sales tax were applied at a higher rate than L's, and then perhaps only on big-ticket items like automobiles.

Question 3

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

Accepted Answer

Nexus

Question 4

An ad valorem property tax is based on the asset's current ____________________.

Accepted Answer

The answer of An ad valorem property tax is based...

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Typically exempt from the sales/use tax base is the purchase of lumber by a do-it-yourself homeowner, when she builds a deck onto her patio.

Accepted Answer

A) True 
 B)False

Question 7

The use tax is designed to complement the sales tax.A use tax typically covers purchases made out of state and brought into the jurisdiction.

Accepted Answer

A) True 
 B)False

Question 8

If a state follows Federal income tax rules, the state's tax compliance and enforcement become easier to accomplish.

Accepted Answer

A) True 
 B)False

Question 9

Shaker Corporation operates in two states, as indicated below.All goods are manufactured in State
A.Determine the sales to be assigned to both states to be used in computing Shaker's sales factor for the year.Both states follow the UDITPA and the MTC regulations in this regard.
  * Excess warehouse space
** Land held for speculation
  * Excess warehouse space, related to business
** Land held for speculation, nonbusiness income

Accepted Answer

The answer of Shaker Corporation operates in two states, as...

Question 10

Under Public Law 86-272, a state is prohibited from taxing a business if the only connection with the state is the _____________________ of orders for sales of tangible personal property that are sent outside the state for approval or rejection and, if approved, are filled and shipped by the business from a point outside of the state.

Accepted Answer

The answer of Under Public Law 86-272, a state is...

Question 11

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice. In what areas might your Federal income tax knowledge also be applicable in your new assignment?

Accepted Answer

The answer of Your supervisor has shifted your responsibilities from...

Question 12

Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income, and its sales and payroll activity and average property owned in each of the states is as follows.  How much more (less) of Boot's income is subject to A income tax if, instead of using an equally-weighted three-factor apportionment formula, A uses a formula with a double-weighted sales factor?

Accepted Answer

A)  ($50,000) .
B)  $50,000.
C)  $16,100.
D)  ($16,100) .

Question 13

Allocation is a method under which a corporation's _________________________ income is directly assigned to the specific states where the income is derived.

Accepted Answer

The answer of Allocation is a method under which a...

Question 14

Mandy Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z.Mandy's activities establish nexus for income tax purposes only in Z.Mandy's sales, payroll, and property among the states include the following.  X utilizes a sales-only factor in its three-factor apportionment formula.How much of Mandy's taxable income is apportioned to X?

Accepted Answer

A)  $0.
B)  $333,333.
C)  $543,333.
D)  $1,000,000.

Question 15

A state sales/use tax is designed to be collected by the ____________________ (seller/purchaser) of the product and then remitted to the state.

Accepted Answer

The answer of A state sales/use tax is designed to...

Question 16

In computing the property factor, property owned by the corporation typically is valued at its ____________________, but without adjusting for depreciation.
or

Accepted Answer

The answer of In computing the property factor, property owned...

Question 17

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 18

Politicians frequently use tax credits and exemptions to create economic development incentives.

Accepted Answer

A) True 
 B)False

Question 19

Mercy Corporation, headquartered in F, sells wireless computer devices, including keyboards and bar code readers. Mercy's degree of operations is sufficient to establish nexus only in E and
F.Determine its sales factor in those states.
State E applies a throwback rule to sales, while State F does not.State G has not adopted an income tax to date.Mercy reported the following sales for the year.All of the goods were shipped from Mercy's F manufacturing facilities.
  
Because F has not adopted a throwback rule, the sales to customers in G and to the U.S.government are not included in either state's sales factor.Mercy creates $70 million in "nowhere sales."
E Sales factor = $60 million/$150 million = 40.00%
F Sales factor = $20 million/$150 million = 13.33%

Accepted Answer

The answer of Mercy Corporation, headquartered in F, sells wireless...

Question 20

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State A applies a throwback rule, but State B does not. In which state(s) will the sale be included in the sales factor numerator?

Accepted Answer

A)   $0 in both A and B.
B)   $100,000 in A.
C)   $100,000 in B.
D)   In both A and B, according to the apportionment formulas of each.

Exam 24: Multistate Corporate Taxation

Pail Corporation is a merchandiser.It purchases overstock garments from various suppliers and sells the goods in its State L retail store.Determine the total sales that are subject to the L consumer sales tax.

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

An ad valorem property tax is based on the asset's current ____________________.

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

Typically exempt from the sales/use tax base is the purchase of lumber by a do-it-yourself homeowner, when she builds a deck onto her patio.

The use tax is designed to complement the sales tax.A use tax typically covers purchases made out of state and brought into the jurisdiction.

If a state follows Federal income tax rules, the state's tax compliance and enforcement become easier to accomplish.

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice. In what areas might your Federal income tax knowledge also be applicable in your new assignment?

Allocation is a method under which a corporation's _________________________ income is directly assigned to the specific states where the income is derived.

A state sales/use tax is designed to be collected by the ____________________ (seller/purchaser) of the product and then remitted to the state.

In computing the property factor, property owned by the corporation typically is valued at its ____________________, but without adjusting for depreciation. or

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.

Politicians frequently use tax credits and exemptions to create economic development incentives.