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Exam 24: Multistate Corporate Taxation

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Question 71

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

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Question 72

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Multistate income tax planning can be effective for the taxpayer because:

A) Different states use different definitions of taxable income.
B) State income tax rates generally are steeply progressive.
C) Both a. and b.
D) Neither a. nor b.

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

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Question 73

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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 determining whether sales/use tax typically must be collected. a. Taxable b. Not taxable -A garment purchased by an employee for wear at an office job.

A capital stock tax usually is structured as an excise tax imposed on a corporation's "net worth," using financial statement data to compute the tax.

P.L. 86-272________________ (does/does not) create nexus when the seller inserts advertising flyers into the Sunday newspaper that is sold in the state.

Typically included in the sales/use tax base is the purchase of tablet computers and cell phone equipment by a large manufacturing firm, whose sales force uses the items.

Anders, a local business, wants your help in making a decision about a large capital investment. To assist your client, list several tax and non-tax implications of the decision.

Allocation is a method under which a corporation's ________________ income is directly assigned to the specific states where the income is derived.

Under common terminology, a unitary group files a ________________ (combined/consolidated) state income tax return.

Typically, state taxable income includes:

In most states, a limited liability company (LLC) is subject to the state income tax:

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

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

Zhao Company sold an asset on the first day of the tax year for $500,000. Zhao'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 $350,000. What adjustment, if any, should be made to Zhao's Federal taxable income in determining the correct taxable income for the typical state?

Under Public Law 86-272, a state is prohibited from taxing a business if the only connection with the state is the ________________of orders for sales of tangible personal property that are sent outside the state for approval or rejection.

Most states' consumer sales taxes are to be paid by the final purchaser of the taxable asset.

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 -Fees paid to an accounting firm for the conduct of a financial audit.

In the income tax apportionment formula, market-sourcing the sales factor means that:

Most states exempt consumer purchases of groceries from the collection of the local sales tax.