Question 1

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses.
a. Addition modification
b. Subtraction modification
c. No modification
-Federal depreciation deduction in excess of state amount.

Accepted Answer

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

Question 2

P.L. 86-272 (does/does not) create nexus when the seller inserts advertising flyers into the Sunday newspaper that is sold in the state.

Accepted Answer

The answer of P.L. 86-272 (does/does not) create nexus when...

Question 3

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses.
a. Addition modification
b. Subtraction modification
c. No modification
-Federal general business credit.

Accepted Answer

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

Question 4

Typically exempt from the sales/use tax base is the purchase of prescription medicines by an individual.

Accepted Answer

A) True 
 B)False

Question 5

Typically included in the sales/use tax base is the purchase of tablet computers and cell phone equipment by a large manufacturing firm, whose sales force uses the items.

Accepted Answer

A) True 
 B)False

Question 6

Hopper Corporation's property holdings in State E are as follows.  Compute the numerator of Hopper's E property factor.

Accepted Answer

A)  $100 million. 
B)  $135 million. 
C)  $140 million. 
D)  $160 million.

Question 7

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

Accepted Answer

A)  Inspection by a sales employee of the customer's inventory for specific product lines. 
B)  Using an independent contractor who acts as a manufacturer's representative for the taxpayer through a sales office in the state. 
C)  Executing a sales campaign, using an advertising agency acting as an independent contractor for the taxpayer. 
D)  Maintenance of inventory in the state by an independent contractor under a consignment plan.

Question 8

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 9

Net Corporation's sales office and manufacturing plant are located in State X. Net also maintains a manufacturing plant and sales office in State W. For purposes of apportionment, X defines payroll as all compensation paid to employees, including contributions to § 401(k) deferred compensation plans. Under the statutes of W, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Net incurred the following personnel costs.  Net's payroll factor for State W is:

Accepted Answer

A)  50.00%. 
B)  37.50%. 
C)  33.33%. 
D)  0.00%.

Question 10

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

The answer of Pail Corporation is a merchandiser. It purchases...

Question 11

The typical state sales/use tax falls on sales of both real and personal property.

Accepted Answer

A) True 
 B)False

Question 12

In some states, an S corporation must withhold Federal income tax for the proportionate flowthrough income of its shareholders who (are/are not) state residents.

Accepted Answer

The answer of In some states, an S corporation must...

Question 13

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation.
a. More than solicitation, creates nexus
b. Solicitation only, no nexus created
-Operating a warehouse for inventory that is held in the state.

Accepted Answer

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

Question 14

An LLC apportions and allocates its annual taxable income in the same manner used by any other business operating in the state.

Accepted Answer

A) True 
 B)False

Question 15

Provide the required information for Orange Corporation, whose Federal taxable income totals $100 million. Orange apportions 70% of its business income to State C. Orange generates $10 million of nonbusiness income each year. Forty percent of that income is attributable to rentals of buildings located in C. Orange's business income this year totals $90 million.
a. State C taxes how much of Orange's business income?
b. State C taxes how much of Orange's nonbusiness income?
c. Explain your results.

Accepted Answer

The answer of Provide the required information for Orange Corporation,...

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

A state can levy an income tax on a business only if the business was incorporated in the state.

Accepted Answer

A) True 
 B)False

Question 18

For most taxpayers, which of the traditional apportionment factors yields the greatest opportunities for tax reduction?

Accepted Answer

A)  Payroll. 
B)  Property. 
C)  Sales (gross receipts). 
D)  Unitary.

Question 19

Bert 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.
   Bert's State M property factor is:

Accepted Answer

The answer of Bert Corporation, a calendar-year taxpayer, owns property...

Question 20

Almost all of the states assess some form of consumer-level sales/use tax.

Accepted Answer

A) True 
 B)False

Exam 16: Multistate Corporate Taxation

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses. a. Addition modification b. Subtraction modification c. No modification -Federal depreciation deduction in excess of state amount.

P.L. 86-272 (does/does not) create nexus when the seller inserts advertising flyers into the Sunday newspaper that is sold in the state.

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses. a. Addition modification b. Subtraction modification c. No modification -Federal general business credit.

Typically exempt from the sales/use tax base is the purchase of prescription medicines by an individual.

Typically included in the sales/use tax base is the purchase of tablet computers and cell phone equipment by a large manufacturing firm, whose sales force uses the items.

Hopper Corporation's property holdings in State E are as follows. Compute the numerator of Hopper's E property factor.

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

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?

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.

The typical state sales/use tax falls on sales of both real and personal property.

In some states, an S corporation must withhold Federal income tax for the proportionate flowthrough income of its shareholders who (are/are not) state residents.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. a. More than solicitation, creates nexus b. Solicitation only, no nexus created -Operating a warehouse for inventory that is held in the state.

An LLC apportions and allocates its annual taxable income in the same manner used by any other business operating in the state.

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

A state can levy an income tax on a business only if the business was incorporated in the state.

For most taxpayers, which of the traditional apportionment factors yields the greatest opportunities for tax reduction?

Almost all of the states assess some form of consumer-level sales/use tax.