Question 1

____________________ describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an entity's income.

Accepted Answer

The answer of ____________________ describe(s) the degree of business activity...

Question 2

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

Accepted Answer

The answer of The starting point in computing state taxable...

Question 3

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.

Accepted Answer

The answer of State Q has adopted sales-factor-only apportionment for...

Question 4

Match each of the following events 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.

Accepted Answer

The answer of Match each of the following events to...

Question 5

In determining taxable income for state income tax purposes, the state NOL deduction typically constitutes a(n) ____________________ modification.

Accepted Answer

The answer of In determining taxable income for state income...

Question 6

In conducting multistate tax planning, the taxpayer should:

Accepted Answer

In conducting multistate tax planning, it is important to review tax opportunities in light of their effect on the overall business, exploit inconsistencies among the taxing statutes and formulas of the states, and consider the tax effects of the plan after accounting for any new compliance and administrative costs that it generates. All of these factors are true and must be taken into account when designing an effective multistate tax planning strategy.

Question 7

Parent and Junior form a non-unitary group of corporations.Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities, the group should:

Accepted Answer

All of the options presented are effective income-shifting techniques for a non-unitary group.

Option A: By executing an intercompany loan, Junior can pay deductible interest to Parent, reducing its taxable income and shifting it to Parent, which has a lower effective tax rate.

Option B: Parent can charge Junior an annual management fee, which is deductible for Junior and taxable for Parent, again reducing Junior's taxable income and shifting it to Parent with a lower tax rate.

Option C: By shifting Parent's high-cost operations to Junior, Parent's expenses decrease, and Junior's expenses increase, effectively shifting income from Parent with a lower tax rate to Junior with a higher tax rate.

Therefore, all of these options can be used to effectively reduce the overall tax liabilities of the group.

Question 8

Slattery Corporation sells widgets in two states. State A levies a 9% effective tax rate, and State B levies a 4% rate. A and B have adopted sales-factor-only apportionment formulas. To reduce overall multistate income tax liabilities, Slattery should:

Accepted Answer

The answer of Slattery Corporation sells widgets in two states....

Question 9

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 and, if approved, are filled and shipped by the business from a point outside of the state.

Accepted Answer

The answer of Under Public Law 86-272, a state is...

Question 10

Match each of the following events 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.

Accepted Answer

The answer of Match each of the following events to...

Question 11

Although apportionment formulas vary among jurisdictions, most states use the same three factors in the formula.The factors are ____________________, ____________________, and ____________________.
or
or

Accepted Answer

The answer of Although apportionment formulas vary among jurisdictions, most...

Question 12

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

Accepted Answer

The answer of Allocation is a method under which a...

Question 13

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

Accepted Answer

Sales (gross receipts) are often the largest factor in determining a corporation's state taxable income. This is particularly true for service-based businesses and other businesses with fairly narrow profit margins, which can reduce their state tax burden by directing their sales to states with low tax rates relative to the size of their markets. Additionally, some states provide single-sales-factor apportionment methods, which emphasize the importance of sales over other factors, making sales particularly important for tax-reducing strategies.

Question 14

P.L.86-272 ____________________ (does/does not) create nexus when the seller runs a booth with inventory samples, at a one-week trade show in the state.

Accepted Answer

The answer of P.L.86-272 ____________________ (does/does not) create nexus when...

Question 15

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

Accepted Answer

The answer of Hopper Corporation's property holdings in State E...

Question 16

P.L.86-272 ____________________ (does/does not) create nexus when the sales representative also makes credit decisions before approving a sale at the customer's location.

Accepted Answer

The answer of P.L.86-272 ____________________ (does/does not) create nexus when...

Question 17

Parent and Junior form a unitary group of corporations.Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities, the group should:

Accepted Answer

The answer of Parent and Junior form a unitary group...

Question 18

In the apportionment formula, most states assign more than a one-third weight to the ____________________ factor.

Accepted Answer

The answer of In the apportionment formula, most states assign...

Question 19

In determining taxable income for state income tax purposes, the Federal NOL deduction typically constitutes a(n) ____________________ modification.

Accepted Answer

The answer of In determining taxable income for state income...

Question 20

Apportionment is a means by which a corporation's _________________________ income is divided among the states in which it conducts business.

Accepted Answer

The answer of Apportionment is a means by which a...

Quiz 24: Multistate Corporate Taxation

____________________ describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an entity's income.

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

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.

Match each of the following events 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.

In determining taxable income for state income tax purposes, the state NOL deduction typically constitutes a(n) ____________________ modification.

In conducting multistate tax planning, the taxpayer should:

Parent and Junior form a non-unitary group of corporations.Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities, the group should:

Slattery Corporation sells widgets in two states. State A levies a 9% effective tax rate, and State B levies a 4% rate. A and B have adopted sales-factor-only apportionment formulas. To reduce overall multistate income tax liabilities, Slattery should:

Match each of the following events 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.

Although apportionment formulas vary among jurisdictions, most states use the same three factors in the formula.The factors are , , and . or or

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

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

P.L.86-272 ____________________ (does/does not) create nexus when the seller runs a booth with inventory samples, at a one-week trade show in the state.

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

P.L.86-272 ____________________ (does/does not) create nexus when the sales representative also makes credit decisions before approving a sale at the customer's location.

Parent and Junior form a unitary group of corporations.Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities, the group should:

In the apportionment formula, most states assign more than a one-third weight to the ____________________ factor.

In determining taxable income for state income tax purposes, the Federal NOL deduction typically constitutes a(n) ____________________ modification.

Apportionment is a means by which a corporation's _________________________ income is divided among the states in which it conducts business.

Quiz 24: Multistate Corporate Taxation

____________________ describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an entity's income.

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

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.

Match each of the following events 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.

In determining taxable income for state income tax purposes, the state NOL deduction typically constitutes a(n) ____________________ modification.

In conducting multistate tax planning, the taxpayer should:

Parent and Junior form a non-unitary group of corporations.Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities, the group should:

Slattery Corporation sells widgets in two states. State A levies a 9% effective tax rate, and State B levies a 4% rate. A and B have adopted sales-factor-only apportionment formulas. To reduce overall multistate income tax liabilities, Slattery should:

Match each of the following events 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.

Although apportionment formulas vary among jurisdictions, most states use the same three factors in the formula.The factors are ____________________, ____________________, and ____________________. or or

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

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

P.L.86-272 ____________________ (does/does not) create nexus when the seller runs a booth with inventory samples, at a one-week trade show in the state.

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

P.L.86-272 ____________________ (does/does not) create nexus when the sales representative also makes credit decisions before approving a sale at the customer's location.

Parent and Junior form a unitary group of corporations.Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities, the group should:

In the apportionment formula, most states assign more than a one-third weight to the ____________________ factor.

In determining taxable income for state income tax purposes, the Federal NOL deduction typically constitutes a(n) ____________________ modification.

Apportionment is a means by which a corporation's _________________________ income is divided among the states in which it conducts business.

Although apportionment formulas vary among jurisdictions, most states use the same three factors in the formula.The factors are , , and . or or