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Exam 16: Multistate Corporate Taxation

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Question 51

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Simpkin Corporation owns manufacturing facilities in States A, B, and C. 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:

A) $1,000,000.
B) $533,333.
C) $475,000.
D) $0.

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

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Question 52

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

A) True
B) False

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Question 53

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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.

Flip Corporation operates in two states, as indicated below. All goods are manufactured in State A. Determine the sales to be assigned to both states to be used in computing Flip's sales factor for the year. Both states follow the UDITPA and the MTC regulations in this regard. State A State B Gross sales to purchasers in state $400,000 $350,000 Sales returns 9,000 11,000 Discounts allowed 21,000 31,000 Carrying charges collected back from customers, separately stated 20,000 10,000 Rental income 60,000 * 25,000 ** * Excess warehouse space, seasonal rental to a competitor. ** Land held for speculation.

Dott Corporation generated $300,000 of state taxable income from selling its mapping software in States A and B. For the taxable year, the corporation's activities within the two states were as follows. Dott has determined that it is subject to tax in both A and B. Both states utilize a three-factor apportionment formula which equally weights sales, property, and payroll. The rates of corporate income tax imposed in A and B are 7% and 10%, respectively. Determine Dott's state income tax liability.

A state might levy a(n) tax when an investor sells shares of stock.

A state sales tax usually falls upon:

Under the UDITPA's concept, sales are assumed to take place at the point of delivery, as opposed to the location at which the shipment originates.

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

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

Usually a business chooses a location where it will build a new plant based chiefly on tax considerations.

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

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.

The starting point in computing state taxable income generally is .

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. a. More than solicitation, creates nexus b. Solicitation only, no nexus created -Owning a tablet computer that is used on sales trips to the state.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. a. More than solicitation, creates nexus b. Solicitation only, no nexus created -Training administrative personnel to use an update to ordering software.

Leased property, when included in the property factor, usually is valued at times its annual rental, even though the taxpayer does not own the asset.

Typically exempt from the sales/use tax base is the purchase by a symphony orchestra of printed music for its players.

Kim Corporation, a calendar year taxpayer, has manufacturing facilities in States A and B. A summary of Kim's property holdings follows. Beginning of Year End of Year 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.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. a. More than solicitation, creates nexus b. Solicitation only, no nexus created -Making a decision as to the creditworthiness of customers.