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Exam 24: Multistate Corporate Taxation

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Question 51

True/False

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S corporations flow-through income amounts to its shareholders, and most states require a withholding of shareholder taxes on the allocated amounts.

A) True
B) False

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Question 52

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Typically, the state's payroll factor ____________________ (does/does not) include the fringe benefits provided to its sales force.

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Question 53

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Judy, a regional sales manager, has her office in State X.Her region includes several states, as indicated in the sales report below.Determine how much of Judy's $200,000 compensation is assigned to the payroll factor of State X.

Troy, an S corporation, is subject to tax only in State A. On Schedule K of its Federal Form 1120S, Troy reported ordinary income of $2,000,000 from its business, municipal bond interest of $150,000, taxable interest of $150,000, and charitable contributions of $300,000.A does not recognize S status, but it does follow the Federal provisions with respect to the determination of taxable income for a corporation.Determine Troy's A taxable income.

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:

All of the U.S.states have adopted a tax based on net taxable income.

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

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.

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.

Almost all of the states assess some form of consumer-level sales/use tax.

Match each of the following events 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.

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

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:

A few states assess a state-level tax on an S corporation that operates in the state.

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?

The individual seller of a used auto should collect and remit sales tax to the state.

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

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

The typical state sales/use tax falls on sales of both real and personal property.

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?