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Exam 24: Multistate Corporate Taxation

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Question 61

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____________________ 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.

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Question 62

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

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Question 63

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Typically exempt from the sales/use tax base is the purchase of tools by a manufacturer to make the widgets that it sells.

A state sales tax usually falls upon:

You are completing the State A income tax return for Quaint Company.Quaint is a limited liability company,and it operates in various states,showing the following results. In A,all interest is treated as business income.A uses a sales-only apportionment factor.Compute Quaint's A taxable income.

Node Corporation is subject to tax only in State X.Node generated the following income and deductions.State income taxes are not deductible for X income tax purposes.

Typically exempt from the sales/use tax base is the purchase by a symphony orchestra of printed music for its players.

A typical state taxable income addition modification is the Federal net operating loss (NOL)deduction.

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.

Trayne Corporation's sales office and manufacturing plant are located in State X.Trayne 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 elective 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.Trayne incurred the following personnel costs. Trayne's payroll factor for State X is:

Use tax would be due if an individual purchased an auto in State A and used it at his home in State B.

Bobby and Sally work for the same employer,Wooster Manufacturing.Bobby manages the company's speculative investment portfolio,and Sally is a foreman in the factory.How are the salaries paid to Bobby and Sally treated in computing Wooster's payroll factor? Apply the general UDITPA rules.

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 .65 for X and .35 for Y. Norman's income attributed to X is:

In determining taxable income for state income tax purposes,the state NOL deduction typically constitutes a(n)____________________ modification.

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:

Most states begin the computation of taxable income with an amount from the Federal income tax return.

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?

In determining state taxable income,all of the following are adjustments to Federal income except:

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. X utilizes an equally weighted three-factor apportionment formula.How much of José's taxable income is apportioned to X?

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 M property factor is: