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Exam 16: Multistate Corporate Taxation

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Question 61

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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. Z utilizes a double-weighted sales factor in its three-factor apportionment formula.How much of José's taxable income is apportioned to Z?

A) $600,000.
B) $120,000.
C) $80,000.
D) $0.

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

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Question 62

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Which of the following is not immune from state income taxation,even if P.L.86-272 is in effect?

A) Sale of the rights associated with a patent used in the taxpayer's business.
B) Sale of office equipment that constitutes inventory to the purchaser.
C) Sale of office equipment to be used in the taxpayer's business.
D) All of the above are protected by P.L.86-272 immunity provisions.

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

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Question 63

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Flint Corporation is subject to a corporate income tax only in State X.The starting point in computing X taxable income is Federal taxable income.Flint's Federal taxable income is $750,000,which includes a $50,000 deduction for state income taxes.During the year,Flint received $10,000 interest on Federal obligations.X tax law does not allow a deduction for state income tax payments. Flint's taxable income for X purposes is:

Hopper Corporation's property holdings in State E are as follows. Compute the numerator of Hopper's E property factor.

For most taxpayers,which of the traditional apportionment factors yields the greatest opportunities for tax reduction?

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

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

In determining a corporation's taxable income for state income tax purposes,which of the following does not constitute a subtraction from Federal income?

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 typical state taxable income addition modification is for the Federal income tax paid for the period.

Hambone Corporation is subject to the State E capital stock tax.The tax is levied at 2% of the entity's net worth that is apportioned to E.Hambone conducts 30% of its operations in E.Hambone's current book balance sheet is as follows,with amounts in millions.Compute Hambone's liability for the E capital stock tax.

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:

A state sales/use tax is designed to be collected by the ____________________ (seller/purchaser)of the product and then remitted to the state.

Typically,corporate income taxes constitute about 20 percent of a state's tax collections.

Hermann 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%).Hermann's state taxable income for the year is $1 million,30% of which relates to B customers.Hermann's level of activities in B is insufficient to create nexus there,but A has adopted a throwback rule as to multistate sales.Would Hermann reduce its total state income tax liability by creating nexus with B,say by allowing its sales force to make credit decisions? Elaborate.

In most states,Federal S corporations must make a separate state-level election of the flow-through status.

State Q has adopted sales-factor-only apportionment for its corporate income tax.As a result,a ____________________ (larger/smaller)percentage of an out-of-state corporation's income is assigned to tax in the state.

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.

Perez Corporation is subject to tax only in State A.Perez generated the following income and deductions. Federal taxable income is the starting point in computing A taxable income.State income taxes are not deductible for A tax purposes.Perez's A taxable income is:

The throwback rule requires that: