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Exam 24: Multistate Corporate Taxation

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Question 91

Multiple Choice

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Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses. -State-level NOL.

A) Addition modification
B) Subtraction modification
C) No modification

D) A) and C)
E) A) and B)

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Question 92

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A state can levy an income tax on a business only if the business was incorporated in the state.

A) True
B) False

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Question 93

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S corporations flow-through income amounts to its shareholders, and most states require a withholding of shareholder taxes on the allocated amounts.

Hopper Corporation's property holdings in State E are as follows. Property factor Item valuation ($M) Manufacturing equipment 100 Land held for potential appreciation 25 Manufacturing equipment that is not currently needed and sits idle 15 Manufacturing equipment that is not currently needed and is leased 20 To another taxpayer Compute the numerator of Hopper's E property factor.

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.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. -A new auto purchased in Europe and shipped by the driver to her home state in the U.S.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. -Purchasing ads that show up on search-result screens for internet browsers.

Marquardt Corporation realized $900,000 taxable income from the sales of its products in States X and Z. Marquardt's activities establish nexus for income tax purposes in both states. Marquardt's sales, payroll, and property among the states include the following. $\begin{array}{lrrr} & \text { State X } & \text { State Z } & \text { Totals } \\\text { Sales } & \$ 1,000,000 & \$ 3,000,000 & \$ 4,000,000 \\\text { Property } & 2,000,000 & -0- & 2,000,000 \\\text { Payroll } & 1,000,000 & -0- & 1,000,000\end{array}$ Z utilizes an equally weighted three-factor apportionment formula. Marquardt is incorporated in X. How much of Marquardt's taxable income is apportioned to Z?

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