01 May Question1916. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question PR #1
Question
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.
b.
Determine Node’s X taxable income, assuming that interest on X obligations is exempt from X income tax.
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.
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
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:
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:
rental property
(200,000)
(50,000)
(250,000)
End of Year
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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