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Exam 24: Multistate Corporate Taxation

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Question 41

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

A) Federal net operating loss.
B) State income tax expense.
C) Fringe benefits paid to officers and executives.
D) Dividends received from other U.S. corporations.

E) A) and B)
F) C) and D)

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Question 42

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

A) True
B) False

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Question 43

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Match each of the following events, considered independently, to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct. a.No change in apportionment factors b.Q apportionment factor increases c.Q apportionment factor decreases d.R apportionment factor increases e.R apportionment factor decreases f.S apportionment factor increases g.S apportionment factor decreases -WillCo completes the construction of production facilities in S.

The sales/use tax that is employed by most U.S.states does not fall on all retail transactions.Identify at least five sales/use tax exemptions that states often allow,eliminating certain transactions from the tax base.

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

Under the UDITPA's ____________________ concept,sales are assumed to take place at the point of delivery,as opposed to the location at which the shipment originates.

Double weighting the sales factor effectively decreases the corporate income tax burden on taxpayers based in the state,such as entities with in-state headquarters.

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.

Dott Corporation generated $300,000 of state taxable income from selling its mapping software in States A and 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 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.

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 -​Fees paid to an accounting firm for the conduct of a financial audit

By making a water's edge election,the multinational taxpayer can limit the reach of unitary principles to the apportionment factors and income of its U.S.and E.U.affiliates.

Some of the states use,in determining whether an out-of-state entity has income tax nexus:

In determining taxable income for state income tax purposes,interest income from another state's bonds typically constitutes a(n) ____________________ modification.

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.

Identify some state/local income tax issues facing pass-through entities such as S corporations,partnerships,and LLCs.

The property factor includes business assets that the taxpayer owns,but also those merely used under a lease agreement.

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 -Purchasing ads that show up on search-result screens for internet browsers.

You are preparing to make a presentation to a client who has some familiarity with state corporate income tax rules.At a general level,list for the client the principles of multistate tax planning.

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 -Groceries purchased by an individual and taken home for meal preparation there.

Britta Corporation's entire operations are located in State A.Eighty percent ($800,000) of Britta's sales are made in A and the remaining sales ($200,000) are made in State B.B has not adopted a corporate income tax.If A has adopted a throwback rule,the numerator of Britta's A sales factor is: