Ace Corporation owns all of the stock of Junior Corporation,a Delaware passive investment company.Ace operates strictly in nonunitary State B,which levies a 6% income tax.This year,Junior earned $200,000 of portfolio interest income and paid $150,000 of this amount to Ace in the form of a dividend.In which state(s)will the interest income create an income tax liability?

Question

Quizplus · Accepted Answer

Typically the passive investment company is incorporated and commercially domiciled in a state (like Delaware)that does not impose a corporate income tax or exempts such income from taxation.

Ace Corporation Owns All of the Stock of Junior Corporation,a