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Exam 16: Multistate Corporate Taxation

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Question 1

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Bobby and Sally work for the same employer,Wooster Manufacturing.Bobby manages the company's speculative investment portfolio,and Sally is a foreman in the factory.How are the salaries paid to Bobby and Sally treated in computing Wooster's payroll factor? Apply the general UDITPA rules in answering this question.

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Only compensation that is related to the...

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Question 2

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Typically exempt from the sales/use tax base is the purchase of inventory from a competitor who is closing down a long-lived business.

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B) False

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Question 3

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Identify some of the areas of the tax law where Federal and state/local provisions are likely to overlap.

Most states waive the collection of sales tax on groceries.

A taxpayer wishing to reduce the negative tax effects of the application of the unitary theory might:

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

The benefits of a passive investment company typically include:

Sales/use tax nexus is established for the taxpayer by the sales-solicitation activities of an independent contractor acting on the taxpayer's behalf.

A state wants to increase its income tax collections,but politically it would be unwise to raise taxes on in-state individuals or businesses.Identify some changes to the income tax apportionment formula that would shift the scheduled income tax increases to out-of-state businesses.

By making a water's edge election,the multinational taxpayer can limit the reach of the unitary theory to U.S.-based factors and income.

Define the terms allocation and apportionment as they are used in multistate income taxation.

Typically exempt from the sales/use tax base is the purchase of seed and feed by a farmer.

Judy,a regional sales manager,has her office in State X.Her region includes several states,as indicated in the sales report below.Determine how much of Judy's $200,000 compensation is assigned to the payroll factor of State X.

Typically exempt from the sales/use tax base is the purchase of prescription medicines by an individual.

The corporate income tax provides about one-half of the annual tax revenues for the typical U.S.state.

The model law relating to the assignment of income among the states for corporations is:

Most states begin the computation of taxable income with an amount from the Federal income tax return.

A few states recognize an entity's S corporation status,such that taxable income flows through directly to shareholders,but they also assess a state-level tax on the entity.

Under P.L.86-272,the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of tangible personal property in the state.

The typical local property tax falls on both an investor's real estate and her stock portfolio.