Law question data bank

1916. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #1
Compute Quail Corporation’s State Q taxable income for the year.
Addition modifications |
$50,000 |
Allocated income – total |
$80,000 |
Allocated income – State Q |
$50,000 |
Allocated income – State P |
$30,000 |
Apportionment percentage |
20% |
Federal taxable income |
$200,000 |
State tax credits |
$3,000 |
Subtraction modifications |
$30,000 |
Tax rate |
5% |
1917. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #2
Node Corporation is subject to tax only in State X. Node generated the
following income and deductions. State income taxes are not deductible for X
income tax purposes.
Sales |
$5,000,000 |
Cost of sales |
3,000,000 |
State X income tax expense |
60,000 |
Depreciation allowed for Federal tax purposes |
1,000,000 |
Depreciation allowed for state tax purposes |
1,800,000 |
Interest income on Federal obligations |
50,000 |
Interest income on X obligations |
200,000 |
Expenses related to carrying X obligations |
30,000 |
a. |
The starting point in computing the X income tax base is Federal taxable income. Derive this amount. |
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b. |
Determine Node’s X taxable income, assuming that interest on X obligations is exempt from X income tax. |
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c. |
Determine Node’s taxable income, assuming that interest on X obligations is subject to X income tax. |
1918. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #3
Provide the required information for Wren Corporation, whose Federal taxable
income totals $100 million. Wren apportions 60% of its business income to State
C. Wren generates $10 million of nonbusiness income each year. Forty percent of
that income is attributable to rentals of buildings located in C. Wren’s
business income this year totals $60 million.
a. |
State C
taxes how much of Wren’s business income? |
b. |
State C
taxes how much of Wren’s nonbusiness income? |
c. |
Explain your results. |
1919. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #4
Condor Corporation generated $450,000 of state taxable income from selling its
product in States A and B. For the taxable year, the corporation’s activities
within the two states were as follows.
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State A |
State B |
Total |
Sales |
$800,000 |
$200,000 |
$1,000,000 |
Property |
300,000 |
–0– |
300,000 |
Payroll |
200,000 |
800,000 |
1,000,000 |
Condor has determined that it is subject to tax in both A and B. Both states
utilize a three-factor apportionment formula that equally weights sales,
property, and payroll. The rates of corporate income tax imposed in A and B are
5% and 3%, respectively. Determine Condor’s state income tax liability.
1920. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #5
Milt Corporation owns and operates two facilities that manufacture paper
products. One of the facilities is located in State D, and the other is located
in State E. Milt generated $1,200,000 of taxable income, comprised of
$1,000,000 of income from its manufacturing facilities and a $200,000 gain from
the sale of nonbusiness property located in E. E does not distinguish between
business and nonbusiness property. D apportions business income. Milt’s
activities within the two states are outlined below.
|
State D |
State E |
Total |
Sales of paper products |
$4,500,000 |
$1,500,000 |
$6,000,000 |
Property |
3,500,000 |
2,500,000 |
6,000,000 |
Payroll |
1,500,000 |
1,000,000 |
2,500,000 |
Both D and E utilize a three-factor apportionment formula, under which sales,
property, and payroll are equally weighted. Determine the amount of Milt’s
income that is subject to income tax by each state.
1921. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #6
Dott Corporation generated $300,000 of state taxable income from selling its
mapping software in States A and B. For the taxable year, the corporation’s
activities within the two states were as follows.
|
State A |
State B |
Total |
Sales |
$500,000 |
$1,500,000 |
$2,000,000 |
Property |
250,000 |
–0– |
250,000 |
Payroll |
200,000 |
300,000 |
500,000 |
Dott has determined that it is subject to tax in both A and B. Both states
utilize a three-factor apportionment formula which equally weights sales,
property, and payroll. The rates of corporate income tax imposed in A and B are
7% and 10%, respectively. Determine Dott’s state income tax liability.
1922. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #7
Shaker Corporation operates in two states, as indicated below. All goods are
manufactured in State A. Determine the sales to be assigned to both states to
be used in computing Shaker’s sales factor for the year. Both states follow the
UDITPA and the MTC regulations in this regard.
|
State A |
State B |
Gross sales to purchasers in state |
$200,000 |
$350,000 |
Sales returns |
9,000 |
11,000 |
Discounts allowed |
21,000 |
41,000 |
Carrying charges collected back from customers |
20,000 |
10,000 |
Rental income |
50,000* |
25,000** |
* Excess warehouse space
** Land held for speculation
1923. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #8
Determine Bowl’s sales factors for States K, M, and N.
Bowl Corporation’s manufacturing facility, distribution center, and retail
store are located in State K. Bowl sells its products to residents located in
States K, M, and N.
Sales to residents of K are conducted through a retail store. Sales to
residents of M are obtained by Bowl’s sales representative, who has the
authority to accept and approve sales orders. Residents of N can purchase
Bowl’s product only if they place an order online and arrange to take delivery
of the product at Bowl’s shipping dock. Bowl’s sales were as follows.
Sales to residents of State K |
$1,000,000 |
Sales to residents of State M |
900,000 |
Sales to residents of State N |
600,000 |
Total |
$2,500,000 |
Bowl’s activities within the three states are limited to those described above.
All of the states have adopted a throwback provision and utilize a three-factor
apportionment formula under which sales, property, and payroll are equally
weighted. K sources dock sales to the destination state.
1924. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #9
Mercy Corporation, headquartered in F, sells wireless computer devices,
including keyboards and bar code readers. Mercy’s degree of operations is
sufficient to establish nexus only in E and F. Determine its sales factor in
those states.
State E applies a throwback rule to sales, while State F does not. State G has
not adopted an income tax to date. Mercy reported the following sales for the
year. All of the goods were shipped from Mercy’s F manufacturing facilities.
Customer |
Customer’s Location |
This Year’s Sales |
NorCo |
E |
$ 60,000,000 |
Tools, Inc. |
F |
20,000,000 |
UniBell |
G |
50,000,000 |
U.S. Department of Defense |
All 50 U.S. States |
20,000,000 |
Total |
|
$150,000,000 |
1925. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #10
Garcia Corporation is subject to tax in States G, H, and I. Garcia’s
compensation expense includes the following.
|
State G |
State H |
State I |
Total |
Salaries and wages for nonofficers |
$200,000 |
$500,000 |
$500,000 |
$1,200,000 |
Officers’ salaries |
–0– |
–0– |
800,000 |
800,000 |
Officers’ salaries are included in the payroll factor for G and H, but not for
I. Compute Garcia’s payroll factors for G, H, and I.
1926. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #11
Kim Corporation, a calendar year taxpayer, has manufacturing facilities in
States A and B. A summary of Kim’s property holdings follows.
|
Beginning of Year |
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State A |
State B |
Total |
Inventory |
$ 300,000 |
$ 200,000 |
$ 500,000 |
Plant and equipment |
2,200,000 |
1,500,000 |
3,700,000 |
Accumulated depreciation: |
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|
|
plant and equipment |
(1,200,000) |
(500,000) |
(1,700,000) |
Land |
500,000 |
600,000 |
1,100,000 |
Rental property* |
900,000 |
300,000 |
1,200,000 |
Accumulated depreciation: |
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|
|
rental property |
(200,000) |
(50,000) |
(250,000) |
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End of Year |
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State A |
State B |
Total |
Inventory |
$ 400,000 |
$ 100,000 |
$ 500,000 |
Plant and equipment |
2,500,000 |
1,200,000 |
3,700,000 |
Accumulated depreciation: |
|
|
|
plant and equipment |
(1,500,000) |
(450,000) |
(1,950,000) |
Land |
600,000 |
400,000 |
1,000,000 |
Rental property* |
900,000 |
300,000 |
1,200,000 |
Accumulated depreciation: |
|
|
|
rental property |
(300,000) |
(100,000) |
(400,000) |
*Unrelated to Kim’s regular business and operations.
Determine Kim’s property factors for the two states. A’s statutes provide that
the average historical cost of business property is to be included in the
property factor. B’s statutes provide that the property factor is based on the
average depreciated basis of in-state business property.
1927. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #12
Troy, an S corporation, is subject to tax only in State A. On Schedule K of its
Federal Form 1120S, Troy reported ordinary income of $2,500,000 from its
business, municipal bond interest of $50,000, taxable interest of $100,000, and
charitable contributions of $300,000. A does not recognize S status, but it
does follow the Federal provisions with respect to the determination of taxable
income for a corporation. Determine Troy’s A taxable income.
1928. CHAPTER
16—MULTISTATE CORPORATE TAXATION Question PR #13
You are completing the State A income tax return for Quaint Company. Quaint is
a limited liability company, and it operates in various states, showing the
following results.
|
Ordinary income |
$800,000 |
|
Net capital loss |
(60,000) |
|
Interest income, IBM bond |
40,000 |
In A, all interest is treated as business income. A uses a sales-only
apportionment factor. Compute Quaint’s A taxable income.
|
State A |
All Other States |
Total |
Sales |
$750,000 |
$1,250,000 |
$2,000,000 |
Property (average cost) |
25,000 |
2,000,000 |
2,025,000 |
Payroll |
100,000 |
900,000 |
1,000,000 |

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