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Exam 16: Multistate Corporate Taxation

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Question 41

Multiple Choice

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Bulky Company sold an asset on the first day of the tax year for $500,000. Bulky's Federal tax basis for the asset was $300,000. Because of differences in cost recovery schedules, the state regular-tax basis in the asset was $375,000. What adjustment, if any, should be made to Bulky's Federal taxable income in determining the correct taxable income for the typical state?

A) $75,000.
B) $25,000.
C) ($75,000) .
D) $0.

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

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Question 42

Multiple Choice

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General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to an agency of the U.S. government. State A applies a throwback rule. In which state(s) will the sale be included in the sales factor numerator?

A) $100,000 in A.
B) $50,000 in A, with the balance exempted from other states' sales factors under the Colgate doctrine.
C) $0 in A.
D) In all of the states, according to the apportionment formulas of each, as the U.S. government is present in all states

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

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Question 43

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The property factor includes land and buildings used for business purposes.

Under P.L. 86-272, the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of in-state realty.

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's "garage sale."

List which items are included in the payroll factor of a state. Consider all forms of compensation that an employee might receive. Apply the general UDITPA rules.

Compute Quail Corporation's State Q taxable income for the year.

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

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?

In conducting multistate tax planning, the taxpayer should:

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?

Determine Bowl's sales factors for States K, M, and N. Bowl Corporation's manufacturing facility, distribution center, and retail store are located in State K. Bowl sells its products to residents located in States K, M, and N. Sales to residents of K are conducted through a retail store. Sales to residents of M are obtained by Bowl's sales representative, who has the authority to accept and approve sales orders. Residents of N can purchase Bowl's product only if they place an order online and arrange to take delivery of the product at Bowl's shipping dock. Bowl's sales were as follows. Bowl's activities within the three states are limited to those described above. All of the states have adopted a throwback provision and utilize a three-factor apportionment formula under which sales, property, and payroll are equally weighted. K sources dock sales to the destination state.

Most states waive the collection of sales tax on groceries.

Although apportionment formulas vary among jurisdictions, most states use a three-factor formula. The factors are ____________________, ____________________, and ____________________. or or

Most jurisdictions levy a property tax on ____________________ but not on ____________________ property. or or

In most states, a taxpayer's income is apportioned on the basis of a formula measuring the extent of business contact, and allocated according to the location of property owned or used.

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State A applies a throwback rule, but State B does not. In which state(s) will the sale be included in the sales factor numerator?

In unitary states, a(n) ____________________ provision permits a multinational corporation to elect to limit the reach of the state's taxing jurisdiction to activities occurring within the boundaries of the United States.

Simpkin Corporation owns manufacturing facilities in States A, B, andC. A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted. B uses a three-factor apportionment formula under which sales are double-weighted. C employs a single-factor apportionment factor, based solely on sales. Simpkin's operations generated $1,000,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows. Simpkin's apportionable income assigned to B is:

Indicate for each transaction whether a sales (S) or use (U) applies, or whether the transaction is nontaxable (N). Where the laws vary among various states, assume that the most common rules apply. All taxpayers are individuals.