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Exam 24: Multistate Corporate Taxation

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Question 1

Multiple Choice

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The most commonly used state income tax apportionment formula is:

A) Sales factor only.
B) Sales factor double-weighted.
C) Sales factor equally weighted with property and payroll.
D) Payroll factor only.

E) None of the above
F) All of the above

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Question 2

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Property taxes generally are collected by local taxing jurisdictions, not the state or Federal governments.

A) True
B) False

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Question 3

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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.

Garcia Corporation is subject to tax in States G, H, and I. Garcia's compensation expense includes the following. Officers' salaries are included in the payroll factor for States G and H, but not for I. Compute Garcia's payroll factors for G, H, and I.

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 -Q adopts a throwback rule.

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

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses. a. Addition modification b. Subtraction modification c. No modification -State income tax expense.

In determining taxable income for state income tax purposes, interest income from Federal bonds typically constitutes a(n)________________ modification.

In applying the typical apportionment formula:

State and local politicians tend to apply new and increased taxes to taxpayers who are nonresident visitors to the jurisdiction, such as a tax on auto rentals and hotel stays, because the taxpayer cannot vote to reelect (or oust) the lawmaker.

The starting point in computing state taxable income generally is ________________ .

When the taxpayer operates in one or more unitary states:

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 -R adopts an increase in its statutory corporate income tax rates.

A use tax applies when a State A resident purchases:

Kim Corporation, a calendar year taxpayer, has manufacturing facilities in States A and B. A summary of Kim's property holdings follows. Determine Kim's property factors for the two states. A's statutes provide that the average historical cost of business property is to be included in the property factor. B's statutes provide that the property factor is based on the average depreciated basis of in-state business property.

Federal taxable income is used as the starting point in computing the state's income tax base, but numerous state adjustments or modifications generally are required to:

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses. a. Addition modification b. Subtraction modification c. No modification -Federal depreciation deduction in excess of state amount.

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 -Prescription drugs and medicines purchased by a consumer.

Sales/use tax in most states applies to a restaurant meal.

Typically, the state's payroll factor ________________ (does/does not) include the salaries and bonuses paid to its corporate executives.