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Exam 24: Multistate Corporate Taxation

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Question 31

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Typically exempt from the sales/use tax base is the purchase of computer and cell phone equipment by a large consulting firm that is incorporated in the state.

A) True
B) False

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Question 32

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The typical local property tax falls on both an investor's real estate and her stock portfolio.

A) True
B) False

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Question 33

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A typical state taxable income addition modification is the income tax paid to the state for the year.

Double weighting the sales factor effectively increases the tax burden on taxpayers based in the state,such as corporations with in-state headquarters.

A state wants to increase its income tax collections,but politically it would be unwise to raise taxes on in-state individuals or businesses.Identify some changes to the income tax apportionment formula that would shift the scheduled income tax increases to out-of-state businesses.

A(n)____________________ business operates its separate companies as a whole.It cannot be segregated into independently operating divisions or branches.

Typically exempt from the sales/use tax base is the purchase by a church of printed music for its choir.

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

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 double-weighted sales factor in its three-factor apportionment formula.How much of Mandy's taxable income is apportioned to X?

The property factor includes real property and construction in progress.

A few states recognize an entity's S corporation status,such that taxable income flows through directly to shareholders,but they also assess a state-level tax on the entity.

Parent and Junior form a unitary group of corporations.Parent is located in a state with an effective tax rate of 3%,while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities,the group should:

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:

In computing the property factor,property owned by the corporation typically is valued at its ____________________,plus the cost of additions and improvements,but without adjusting for ____________________.

A service engineer spends 60% of her time maintaining the employer's productive business property and 40% maintaining the employer's nonbusiness rental properties.This year,her compensation totaled $90,000.The payroll factor assigns $90,000 to the state in which the employer is based.

Nonbusiness income includes rentals of investment property.

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.Assuming the following data are correct,compute Quaint's A taxable income.

Polly is an employee of a consulting firm.She spends time working in three different U.S.states.To which state(s)' payroll factor(s)is her compensation assigned? Apply the general UDITPA rules in answering this question.

A ____________________ tax is designed to complement the local sales tax structure.

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