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Exam 13: Multijurisdictional Taxation

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Question 51

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A number of court cases in the last several decades have involved the application of a state's nexus rules concerning a business taxpayer.What is the significance of the term nexus when discussing state income taxation?

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A U.S.state cannot levy an income tax on...

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Question 52

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Chipper Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z.Chipper's activities establish nexus for income tax purposes only in Z,the state of its incorporation.Chipper's sales,payroll,and property among the states include the following. $\begin{array}{llll}&\textbf{State X} &\textbf{State Z}&\textbf{Totals}\\\text { Sales } & \$ 1,000,000 & \$ 2,000,000 & \$ 3,000,000 \\\text { Property } & 200,000 & 2,300,000 & 2,500,000 \\\text { Payroll } & 100,000 & 1,900,000 & 2,000,000\end{array}$ X utilizes a sales-only factor in its three-factor apportionment formula.How much of Chipper's taxable income is apportioned to X?

A) $0.
B) $333,333.
C) $500,000.
D) $1,000,000.

E) All of the above
F) None of the above

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Question 53

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A controlled foreign corporation (CFC) realizes Subpart F income from:

U.S.individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

U.S.income tax treaties typically:

Olaf,a citizen of Norway with no trade or business activities in the United States,sells at a gain 200 shares of MicroShift,Inc.,a U.S.company.The sale takes place through Olaf's broker in Oslo.How is this gain treated for U.S.tax purposes?

Discuss how a multistate business divides up its corporate taxable income among the states in which it operates.Hint: use the terms allocation and apportionment in your comments.

The throwback rule requires that:

Which of the following is a principle used in applying the income-sourcing rules under U.S.tax law?

Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.

Which of the following persons typically is not concerned with the U.S.-sourcing rules for gross income?

A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect)paid or accrued.

Unused foreign tax credits are carried back two years and then forward 20 years.

Boot Corporation is subject to income tax in States A andB 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. $\begin{array}{llll}&\textbf{State A} &\textbf{State B}&\textbf{Totals}\\\text { Sales } & \$ 200,000 & \$ 600,000 & \$ 800,000 \\\text { Payroll } & 100,000 & 50,000 & 150,000 \\\text { Property } & 200,000 & 50,000 & 250,000\end{array}$ 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?

Columbia,Inc.,a U.S.corporation,receives a $150,000 cash dividend from Starke,Ltd.Columbia owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $750,000 attributable to that E & P.What is Columbia's gross income related to the Starke dividend?

Performance,Inc.,a U.S.corporation,owns 100% of Krumb,Ltd.,a foreign corporation.Krumb earns only general basket income.During the current year,Krumb paid Performance a $200,000 dividend.The foreign tax credit associated with this dividend is $30,000.The foreign jurisdiction requires a withholding tax of 30%,so Performance received only $140,000 in cash as a result of the dividend.What is Performance's total U.S.gross income reported as a result of the $140,000 cash received?

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 busines income? b. State C taxes how much of Orange's non business income? c. Explain your results.

A domestic corporation is one whose assets are primarily located in the U.S.For this purpose,the primarily located test (>50%)applies.

Dott Corporation generated $300,000 of state taxable income from selling its mapping software in States A and B.Both states utilize a three-factor apportionment formula which equally weights sales,property,and payroll.The rates of corporate income tax imposed in A and B are 7% and 10%,respectively.Determine Dott's state income tax liability. B.For the taxable year,the corporation's activities within the two states were as follows. Dott has determined that it is subject to tax in both A and

GreenCo,a U.S.corporation,earns $25 million of taxable income from U.S.sources and $10 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?