Deck 15: Multistate Corporate Taxation

Question 1

Eel Corporation realized $400,000 of taxable income from the sales of its products in States X and Z.Eel's activities in both states establish nexus for income tax purposes.Eel's sales, payroll, and property among the states include the following. $\begin{array}{ll}&\text { State X }&\text { State Y }&\text { Totals }\\\hline\text { Sales }&\$4,000,000&\$1,000,000&\$5,000,000\\\text { Property }&500,00&1,500,000&2,000,000\\\text { Payroll }&1,000,000&1,000,000&2,000,000\end{array}$
Z utilizes a double-weighted sales factor in its three-factor apportionment formula.How much of Eel's taxable income is apportioned to Z?

A)$193,334.
B)$165,000.
C)$220,000.
D)$235,000.
E)None of the above.

Answer 1

$165,000.

Question 2

Christina, a regional sales manager, has her office in State V.Her region includes several states, as indicated in the sales report below.Determine how much of Christina's $100,000 compensation is assigned to the payroll factor of State V. $$\begin{array}{l}\text { State } & \text { Sales Generated } &\text { Christina's Time Spent There }\\ \mathrm { U } & \$ 6,000,000 & 40 \% \\\mathrm {~V} & \$ 10,000,000 & 20 \% \\\mathrm { X } & \$ 8,000,000 & 40 \% &\end{array}$$

A)$0.
B)$20,000.
C)$40,000.
D)$100,000.
E)None of the above.

Answer 2

$100,000.

Question 3

Monitor Company sold an asset on the first day of the tax year for $600,000.Its regular tax basis was $250,000, and its basis for Federal AMT purposes was $220,000.Because of differences in cost recovery schedules, the state basis in the asset was $300,000.What adjustment, if any, should be made to Federal taxable income in determining the correct taxable income for the typical state?

A)($70,000).
B)($50,000).
C)$50,000.
D)$0.
E)Some other amount.

Answer 3

B

Question 4

Coral Corporation owns manufacturing facilities in States A, B, and C.State A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted.State B uses a three-factor apportionment formula under which sales are double-weighted.State C employs a single-factor apportionment factor, based solely on sales. Coral's operations generated $750,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows. $\begin{array}{ll}&\text { State A }&\text { State B }&\text { State C }&\text { Totals }\\\hline\text { Sales }&\$1,000,000&\$5,000,000&\$4,000,000&\$10,000,000\\\text { Property }&200,000&700,000&100,000&1,000,000\\\text { Payroll }&1,200,000&2,000,000&800,000&4,000,000\end{array}$
Coral 's apportionable income assigned to State A is:

A)$750,000.
B)$300,000.
C)$175,000.
D)$150,000.
E)None of the above.

Question 5

State D has adopted the principles of UDITPA.Given the following transactions for the year, determine Comp Corporation's State D payroll factor denominator. $\begin{array}{ll}\text { Compensation of sales force }&\$500,000\\\text { Compensation paid to independent }&350,000\\\text { Compensation paid to managers of nonbusiness rental property }&250,000\end{array}$

A)$250,000.
B)$500,000.
C)$600,000.
D)$850,000.
E)$1,100,000.

Question 6

Python Corporation realized $200,000 of taxable income from the sales of its products in States X and Z.Python's activities in both states establish nexus for income tax purposes.Python's sales, payroll, and property among the states include the following. $\begin{array}{ll}&\text { State X }&\text { State Y }&\text { Totals }\\\hline\text { Sales }&\$4,000,000&\$1,000,000&\$5,000,000\\\text { Property }&2,000,00&6,000,000&8,000,000\\\text { Payroll }&8,000,000&8,000,000&16,000,000\end{array}$
State Z utilizes a equally-weighted three-factor apportionment formula.How much of Python's taxable income is apportioned to State Z?

A)$63,334.
B)$76,667.
C)$96,600.
D)$103,400.
E)None of the above.

Question 7

Boa Corporation owns manufacturing facilities in States A, B, and C.State A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted.State B uses a three-factor apportionment formula under which sales are double-weighted.State C employs a single-formula apportionment factor, based solely on sales. Boa's operations generated $750,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows. $\begin{array}{ll}&\text { State A }&\text { State B }&\text { State C }&\text { Totals }\\\hline\text { Sales }&\$1,000,000&\$5,000,000&\$4,000,000&\$10,000,000\\\text { Property }&200,000&600,000&200,000&1,000,000\\\text { Payroll }&1,200,000&2,000,000&800,000&4,000,000\end{array}$
Boa 's apportionable income assigned to State B is:

A)$750,000.
B)$525,000.
C)$393,750.
D)$375,000.
E)None of the above.

Question 8

Anaconda Corporation's entire operations are located in State A.Seventy percent ($700,000) of Anaconda's sales are made in A and the remaining sales ($300,000) are made in State B.Anaconda's activities in B are not sufficient to create nexus in that state.If A has adopted a throwback rule, the numerator of the A sales factor is:

A)$0.
B)$300,000.
C)$500,000.
D)$700,000.
E)$1,000,000.

Question 9

Cobra Corporation is subject to a corporate income tax only in State X.The starting point in computing X taxable income is Federal taxable income.Cobra's Federal taxable income is $250,000, which includes a $55,000 deduction for state income taxes.During the year, Cobra received $150,000 interest on Federal obligations and $45,000 of interest on State Z obligations.X does not allow a deduction for state income tax payments, but it does exclude interest earned on its own obligations. Cobra's taxable income for X purposes is:

A)$195,000.
B)$200,000.
C)$205,000.
D)$250,000.
E)$445,000.

Question 10

Newt Corporation is subject to tax only in State A.Newt generated the following income and deductions. $$\begin{array} { l l } \text { Federal taxable income } & \$ 500,000 \\\text { State A income tax expense } & 40,000 \\\text { Depreciation allowed for Federal tax purposes } & 160,000 \\\text { Depreciation allowed for state tax purposes } & 225,000\end{array}$$ Federal taxable income is the starting point in computing State A taxable income and state income taxes are not deductible for state tax purposes.Newt's State A taxable income is:

A)$475,000.
B)$500,000.
C)$540,000.
D)$565,000.
E)$605,000.