Law question data bank

1866. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #36
In most states, a limited liability company (LLC) is subject to the state
income tax:
a.
As a flow-through entity, similar to its Federal income tax treatment.
b. As though it were a unitary business.
c. As though it were a C corporation.
d. LLCs typically are exempted from
state income taxation.
1867. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #37
A state sales tax usually falls upon:
a.
Sales of groceries.
b. Sales made to out-of-state customers.
c. Sales made to the U.S. Department of
Education.
d. Sales made to the ultimate consumer
of the product or service.
1868. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #38
A state sales tax usually falls upon:
a.
The sale of a used dinette set sold at a rummage sale.
b. The sale of a dinette set by the
manufacturer to the retailer.
c. The purchase of a Bible by a member
at the church’s bookstore.
d. The sale of a case of Bibles by the
publisher to a church bookstore.
e. All of the above are exempt
transactions.
1869. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #39
A use tax applies when a State A resident purchases:
a.
A new automobile from a State A dealership.
b. A used automobile from the web site
of a State A dealership.
c. A new automobile from a State B dealership,
then using the car back at home.
d. Hardware from sears.com rather than
at the Best Buy store at the local mall.
1870. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #40
In conducting multistate tax planning, the taxpayer should:
a.
Review tax opportunities in light of their effect on the overall business.
b. Exploit inconsistencies among the
taxing statutes and formulas of the states.
c. Consider the tax effects of the plan
after accounting for any new compliance and administrative costs that it
generates.
d. All of the above are true.
1871. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #41
When the taxpayer operates in one or more unitary states:
a.
Apportionment factors are computed on a group-wide basis.
b. The tax incentive of creating nexus
in a low-tax state is enhanced.
c. The tax benefit of a passive
investment subsidiary holding company is neutralized.
d. The use of a water’s edge election
should be considered.
e. All of the above are true.
1872. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #42
The benefits of a passive investment company typically include:
a.
Reduced state income taxes.
b. Isolation of the entity’s portfolio
income from taxation in other nonunitary states.
c. Exclusion of the subsidiary’s portfolio
income from the parent corporation’s apportionment formula denominator in other
nonunitary states.
d. All of the above are benefits.
1873. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #43
Giant Corporation owns all of the stock of Junior Corporation, a Delaware
passive investment company. Giant operates strictly in nonunitary State B,
which levies a 9% income tax. This year, Junior earned $200,000 of portfolio
interest income and paid a $150,000 dividend to Giant. In which state(s) will
the interest income create an income tax liability?
a.
In neither state.
b. Only in Delaware.
c. Only in B.
d. In both B and Delaware, according to
the apportionment formulas of each.
1874. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #44
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:
a.
Execute an intercompany loan, such that Junior pays deductible interest to
Parent.
b. Have Parent charge Junior an annual
management fee.
c. Shift Parent’s high-cost assembly and
distribution operations to Junior.
d. All of the above are effective
income-shifting techniques for a unitary group.
e. None of the above is an effective
income-shifting technique for a unitary group.
1875. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #45
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:
a.
Execute an intercompany loan, such that Junior pays deductible interest to
Parent.
b. Have Parent charge Junior an annual
management fee.
c. Shift Parent’s high-cost assembly and
distribution operations to Junior.
d. All of the above are effective
income-shifting techniques for a non-unitary group.
e. None of the above is an effective
income-shifting technique for a non-unitary group.
1876. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #46
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:
a.
Remove all stored inventory from A.
b. Establish a personal training center
in A.
c. Move its home office from B to A.
d. Convert to employee status the independent
contractors that it uses to sell widgets in A.
1877. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #47
For most taxpayers, which of the traditional apportionment factors yields the
greatest opportunities for tax reduction?
a.
Payroll.
b. Property.
c. Unitary.
d. Sales (gross receipts).
1878. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MC #48
Pryce Corporation’s property holdings in State E are as follows.
Item |
|
Property
factor |
Manufacturing equipment |
|
100 |
Land held for potential appreciation |
|
25 |
Manufacturing equipment that is not currently needed and sits idle |
|
5 |
Manufacturing equipment that is not currently needed and is leased to another taxpayer |
|
20 |
Compute the numerator of Pryce’s E property factor.
a.
$150 million.
b. $125 million.
c. $120 million.
d. $100 million.
1879. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MA #1-7
Match each of the following terms with
the appropriate description, in the state income tax formula.Treasury Bond
interest incomeDeduction for cost of goods soldState income tax expenseState
depreciation deduction in excess of Federal amountFederal income taxes
paidDividend income from Exxon Mobile bonds heldFederal energy
creditSubtraction modification No modification Addition modification
Subtraction modification Subtraction modification Subtraction modification No
modification
[a] 1. Treasury Bond interest income
[b] 2. Deduction for cost of
goods sold
[c] 3. State income tax
expense
[d] 4. State depreciation
deduction in excess of Federal amount
[e] 5. Federal income taxes
paid
[f] 6. Dividend income from
Exxon Mobile bonds held
[g] 7. Federal energy credit
1880. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MA #8-14
Match each of the following items with
the appropriate description, in applying the P.L. 86-272 definition of solicitation.Owning a
company car used on sales trips to the stateMaking a decision as to the
creditworthiness of customersTraining administrative personnel to use new
softwareMaintaining a product after purchase, on the customer’s premisesWriting
up a sales orderRunning a television advertising campaign that is seen in the
stateOperating an office to interview and hire employeesSolicitation only, no
nexus created More than solicitation, creates nexus More than solicitation,
creates nexus More than solicitation, creates nexus Solicitation only, no nexus
created Solicitation only, no nexus created More than solicitation, creates
nexus
[a] 1. Owning a company car used on
sales trips to the state
[b] 2. Making a decision as to
the creditworthiness of customers
[c] 3. Training administrative
personnel to use new software
[d] 4. Maintaining a product
after purchase, on the customer’s premises
[e] 5. Writing up a sales
order
[f] 6. Running a television
advertising campaign that is seen in the state
[g] 7. Operating an office to
interview and hire employees
1881. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MA #15-18
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.Q adopts a throwback ruleQ adopts a sales-only apportionment
formulaWillCo establishes nexus with SR adopts a cut in its statutory tax
ratesQ apportionment factor increases Q apportionment factor decreases Q
apportionment factor decreases No change in apportionment factors R
apportionment factor increases R apportionment factor decreases S apportionment
factor increases S apportionment factor decreases
[a] 1. Q adopts a throwback rule
[b] 2. Q adopts a sales-only
apportionment formula
[c] 3. WillCo establishes
nexus with S
[d] 4. R adopts a cut in its
statutory tax rates
1882. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question MA #19-29
Match each of the following items with
the appropriate description, in determining whether sales/use tax typically
must be collected.A garment purchased for resaleA garment purchased by an
actressA garment purchased for wear at an office jobTextbook purchased by a
State University studentA new auto purchased in Europe and shipped by the
driver to her home statePrescription drugs and medicinesAccounting services
purchased by a businessComputer equipment purchased by a charityT-shirts
purchased by an individual at a rummage saleGroceries purchased and taken homeA
meal eaten at a restaurantNot taxable Taxable Taxable Taxable Taxable Not
taxable Not taxable Not taxable Not taxable Not taxable Taxable
[a] 1. A garment purchased for
resale
[b] 2. A garment purchased by
an actress
[c] 3. A garment purchased for
wear at an office job
[d] 4. Textbook purchased by a
State University student
[e] 5. A new auto purchased in
Europe and shipped by the driver to her home state
[f] 6. Prescription drugs and
medicines
[g] 7. Accounting services
purchased by a business
[h] 8. Computer equipment
purchased by a charity
[i] 9. T-shirts purchased by
an individual at a rummage sale
[j] 10. Groceries purchased
and taken home
[k] 11. A meal eaten at a
restaurant
1883. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #1
The starting point in computing state taxable income generally is
____________________.
1884. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #2
In determining taxable income for state income tax purposes, the Federal NOL
deduction typically constitutes a(n) ____________________ modification.
1885. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #3
In determining taxable income for state income tax purposes, the state NOL
deduction typically constitutes a(n) ____________________ modification.
1886. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #4
____________________ 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.
1887. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #5
Under _____________________, a state is prohibited from taxing a business if
the only connection with the state is the solicitation 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.
1888. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #6
P.L. 86-272 ____________________ (does/does not) create nexus when the seller
conducts its sales solicitations from a calling center building that it owns.
1889. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #7
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.
1890. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #8
_________________________ is a means by which a corporation’s business income
is divided among the states in which it conducts business.
1891. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #9
____________________ is a method under which a corporation’s nonbusiness income
is directly assigned to the specific states where the income is derived.
1892. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #10
Although apportionment formulas vary among jurisdictions, most states use a
three-factor formula. The factors are ____________________,
____________________, and ____________________.
1893. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #11
In the apportionment formula, most states assign more than a one-third weight
to the ____________________ factor.
1894. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #12
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.
1895. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #13
Under the UDITPA’s ____________________ concept, sales are assumed to take
place at the point of delivery, as opposed to the location at which the
shipment originates.
1896. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #14
When a _________________________ is in effect, out-of-state sales that are not
subject to tax in the destination state are pulled back into the sales factor
numerator of the origination state.
1897. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #15
Typically, the state’s payroll factor ____________________ (does/does not)
include the fringe benefits provided to its sales force.
1898. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #16
In computing the property factor, property owned by the corporation typically
is valued at its ____________________, plus the cost of additions and
improvements, but without adjusting for ____________________.
1899. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #17
Leased property, when included in the property factor, usually is valued at
____________________ times its annual rental, even though the taxpayer does not
own the asset.
1900. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #18
A(n) ____________________ business operates its separate companies as a whole.
It cannot be segregated into independently operating divisions or branches.
1901. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #19
In unitary states, a(n) ____________________ provision permits a multinational
corporation to elect to limit the reach of the state’s taxing jurisdiction to
activities occurring within the boundaries of the United States.
1902. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #20
Overall tax liabilities typically ____________________ (increase/decrease) if
the members of a unitary group begin to include affiliates that generate net
operating losses.
1903. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #21
Under common terminology, a unitary group files a ____________________ state
income tax return.
1904. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #22
In some states, an S corporation must withhold Federal income tax for its
shareholders who ____________________ (are/are not) state residents.
1905. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #23
Several states allow the S corporation to file a(n) ____________________ income
tax return, usually in the form of a state-by-state spreadsheet, on behalf of
its out-of-state shareholders.
1906. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #24
Almost all of the states treat a general partnership as a ____________________
entity for income tax purposes.
1907. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #25
Typically, a sales/use tax is applied to a retail sale of ____________________
property.
1908. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #26
A state sales/use tax is designed to be collected by the ____________________
(seller/purchaser) of the product and then remitted to the state.
1909. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #27
A ____________________ tax is designed to complement the local sales tax
structure, to prevent the consumer from making purchases in another, lower-tax
state.
1910. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #28
The sale of a prescription medicine probably is exempt from sales/use tax under
the _________________________ rule.
1911. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #29
The ____________________ tax usually is applied at the city or county level, as
its main source of revenue.
1912. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #30
Most jurisdictions levy a property tax on ____________________ but not on
____________________ property.
1913. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #31
An ad valorem property tax is based
on the asset’s current ____________________.
1914. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #32
A state might levy a(n) ____________________ tax when an investor sells shares
of stock.
915. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question CO #33
The ____________________ tax levied by a state usually is based on the book
value of a corporation’s “net worth.”

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