Question 1

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 2

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 3

In conducting multistate tax planning, the taxpayer should:

Accepted Answer

In conducting multistate tax planning, it is important to consider all possible tax opportunities, but also to review them in light of their effect on the overall business. The taxpayer should also consider exploiting any inconsistencies among the taxing statutes and formulas of the states, while at the same time accounting for any new compliance and administrative costs that might be generated as a result of the plan. Therefore, all of the above choices are true and should be considered when conducting multistate tax planning.

Question 4

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

Accepted Answer

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

Question 5

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 6

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 7

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 8

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...

Question 9

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 listed are effective income-shifting techniques for a non-unitary group. An intercompany loan with deductible interest from Junior to Parent will decrease Junior's taxable income and increase Parent's taxable income. Charging Junior an annual management fee will have a similar effect. Shifting high-cost operations from Parent to Junior will reduce Parent's taxable income and increase Junior's taxable income. By utilizing a combination of these techniques, the overall tax liabilities of the group can be reduced.

Question 10

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 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

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 13

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

By removing all stored inventory from State A, Slattery Corporation can potentially reduce its sales factor in State A, thereby reducing the amount of income apportioned to the higher tax rate state.

Question 14

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

Accepted Answer

For most taxpayers, sales (gross receipts) yield the greatest opportunities for tax reduction as they are more easily manipulated, such as through the use of affiliate transactions, sourcing of sales to lower tax rate jurisdictions, and choosing between apportionment formulas. Payroll and property are less easily manipulated, while unitary apportionment is typically reserved for multi-state corporations.

Question 15

____________________ 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 16

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 17

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 18

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 19

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 20

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...

Quiz 24: Multistate Corporate Taxation

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.

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.

In conducting multistate tax planning, the taxpayer should:

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

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 determining taxable income for state income tax purposes, the state 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.

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:

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

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

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.

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:

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

____________________ 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.

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

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.

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

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

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.

Quiz 24: Multistate Corporate Taxation

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.

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.

In conducting multistate tax planning, the taxpayer should:

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

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 determining taxable income for state income tax purposes, the state 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.

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:

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

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

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.

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:

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

____________________ 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.

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

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.

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

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

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