Question 1

Identify some state/local income tax issues facing pass-through entities such as S corporations, partnerships, and LLCs.

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Question 2

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice. In what areas might your Federal income tax knowledge also be applicable in your new assignment?

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Question 3

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
-Dividend income from P & G stock held.

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Question 4

In international taxation, we discuss income sourcing rules and the permanent establishment doctrine. In multistate taxation, an analogous term might be the "ultimate destination concept." Define this term, and identify at least two of the most important exceptions to the general rule.

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Question 5

Bobby and Sally work for the same employer, Wooster Manufacturing, which makes brushes for artists and painters. Bobby spends one­half of his time managing the company's speculative investment portfolio, and the other half working with the corporate treasurer in securing cash flow for manufacturing payrolls. Sally is a foreman in the brush factory.
How are the salaries paid to Bobby and Sally treated in computing Wooster's payroll factor? Apply the general UDITPA rules.

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Question 6

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.

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Question 7

A number of court cases in the last several decades have involved the application of a state's nexus rules concerning a business taxpayer. What is the significance of the term nexus when discussing state income taxation?

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Question 8

Your client, Hamlin Industries, wants to reduce its overall state/local income tax liability. Hamlin holds income- producing assets of various types, including tangible personal property, rental land and buildings, and high-yield stocks and bonds. You assess the asset portfolio and conclude that only the investment portfolio is "portable" and available for relocation at this time. What device might Hamlin use in a restructuring of its operations to achieve the desired tax result? Be specific.

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Question 9

Discuss how a multistate business divides up its corporate taxable income among the states in which it operates.
Hint: use the terms allocation and apportionment in your comments.

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Question 10

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
-Treasury Bond interest income.

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Question 11

The sales/use tax that is employed by most U.S. states does not fall on all retail transactions. Identify at least five sales/use tax exemptions that states often allow, eliminating certain transactions from the tax base.

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Question 12

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.

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Question 13

State Q wants to increase its income tax collections, but politically it would be unwise to raise taxes on in-state individuals or businesses. Q currently follows all UDITPA rules and employs an equally weighted three-factor apportionment formula. Q allocates nonbusiness income amounts.
Identify some changes to the income tax apportionment formula that would shift the scheduled income tax increases to out-of-state businesses.

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Question 14

Pail Corporation is a merchandiser. It purchases overstock garments from various suppliers and sells the goods in its State L retail store. Determine the total sales that are subject to the L consumer sales tax.

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Question 15

List at least five items that are included in the payroll factor of a typical state. Consider all forms of compensation that an employee might receive. Apply the general UDITPA rules.

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Question 16

Franz Corporation is based in State A (corporate income tax rate 10%). It sells its goods to customers in both A and State B (corporate income tax rate 4%). Franz's state taxable income for the year is $1 million, 45% of which relates to B customers. Franz's level of activities in B is insufficient to create nexus there, but A has adopted a throwback rule as to multistate sales. Would Franz reduce its total state income tax liability by creating nexus with B, say by allowing its sales force to make credit decisions? Elaborate.

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Question 17

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.

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Question 18

Compost Corporation has finished its computation of Federal taxable income. In State Q, the derivation of state corporate taxable income starts with the Federal amount and makes a number of modifications. List at least five such modifications that Compost is likely to encounter. In this regard, follow the general UDITPA rules, and list both addition and subtraction modifications.

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Question 19

Hambone Corporation is subject to the State E capital stock tax. The tax is levied at 2% of the entity's net worth that is apportioned to E. Hambone conducts 30% of its operations in State E. Hambone's current book balance sheet is as follows, with amounts in millions. Compute Hambone's liability for the E capital stock tax.

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Question 20

Sylvia spends time working at the offices of her employer as a consultant to clients who are located in three different U.S. states. To which state(s)' payroll factor(s) is Sylvia's compensation assigned? Apply the general UDITPA rules.

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Quiz 16: Multistate Corporate Taxation

Identify some state/local income tax issues facing pass-through entities such as S corporations, partnerships, and LLCs.

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice. In what areas might your Federal income tax knowledge also be applicable in your new assignment?

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 -Dividend income from P & G stock held.

In international taxation, we discuss income sourcing rules and the permanent establishment doctrine. In multistate taxation, an analogous term might be the "ultimate destination concept." Define this term, and identify at least two of the most important exceptions to the general rule.

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.

A number of court cases in the last several decades have involved the application of a state's nexus rules concerning a business taxpayer. What is the significance of the term nexus when discussing state income taxation?

Discuss how a multistate business divides up its corporate taxable income among the states in which it operates. Hint: use the terms allocation and apportionment in your comments.

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 -Treasury Bond interest income.

The sales/use tax that is employed by most U.S. states does not fall on all retail transactions. Identify at least five sales/use tax exemptions that states often allow, eliminating certain transactions from the tax base.

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.

Pail Corporation is a merchandiser. It purchases overstock garments from various suppliers and sells the goods in its State L retail store. Determine the total sales that are subject to the L consumer sales tax.

List at least five items that are included in the payroll factor of a typical state. Consider all forms of compensation that an employee might receive. Apply the general UDITPA rules.

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.

Sylvia spends time working at the offices of her employer as a consultant to clients who are located in three different U.S. states. To which state(s)' payroll factor(s) is Sylvia's compensation assigned? Apply the general UDITPA rules.