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Exam 24: Multistate Corporate Taxation

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Question 31

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A taxpayer wishing to reduce the negative tax effects of the application of the unitary theory might:

A) Affiliate with a service division that shows an operating loss,like one in research and development.
B) Acquire a unitary affiliate in a country with a high wage structure.
C) Add a profitable entity to the unitary group.
D) a.and b.

E) B) and D)
F) None of the above

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Question 32

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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 -Making a decision as to the creditworthiness of customers.

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Question 33

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Franz Corporation is based in State A (corporate income tax rate 10%).It sells its goods to customers in both A and State B (corporate income tax rate 4%).Franz's state taxable income for the year is $1 million,45% of which relates to B customers.Franz's level of activities in B is insufficient to create nexus there,but A has adopted a throwback rule as to multistate sales.Would Franz reduce its total state income tax liability by creating nexus with B,say by allowing its sales force to make credit decisions? Elaborate.

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:

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a.Taxable b.Not taxable -A textbook purchased by a State University student.

Federal taxable income is used as the starting point in computing the state's income tax base,but numerous state adjustments or modifications generally are required to:

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a.Taxable b.Not taxable -A new auto purchased in Europe and shipped by the driver to her home state in the U.S.

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:

The benefits of a passive investment company typically include:

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.

Apportionment is a means by which a corporation's _________________________ income is divided among the states in which it conducts business.

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

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.

Leased property,when included in the property factor,usually is valued at ____________________ times its annual rental,even though the taxpayer does not own the asset.

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

Roughly five percent of all taxes paid by businesses in the U.S.are to state,local,and municipal jurisdictions.

Your client,Hamlin Industries,wants to reduce its overall state/local income tax liability.Hamlin holds income-producing assets of various types,including tangible personal property,rental land and buildings,and high-yield stocks and bonds.You assess the asset portfolio and conclude that only the investment portfolio is "portable" and available for relocation at this time.What device might Hamlin use in a restructuring of its operations to achieve the desired tax result? Be specific.

The model law relating to the assignment of income among the states for corporations is:

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

Compute Still Corporation's State Q taxable income and tax liability for the year.