Question1929. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question PR #14

01 May Question1929. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question PR #14

Question
1929. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question PR #14
Pail Corporation is a merchandiser. It purchases overstock garments from various suppliers and sells the goods in its State L retail store. Determine the total sales that are subject to the L consumer sales tax.

Sales to L residents

$800,000

Sales to homeless shelters

75,000

Sales to residents who cross the border from nearby State M

100,000

Sales to a similar merchandiser, located in another L town

50,000

1930. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question PR #15
Indicate for each transaction whether a sales (S) or use (U) applies, or whether the transaction is nontaxable (N). Where the laws vary among various states, assume that the most common rules apply. All taxpayers are individuals.

a.

A resident of State A purchases a computer in A.

b.

A resident of State A purchases prescription medicine in A.

c.

A resident of State B purchases a computer in A.

d.

A church purchases office supplies in A.

e.

A State A retailer purchases in B an item that will be in the inventory of its business.

f.

A resident of State A purchases hardware from a retail home improvement store in A.

g.

A business based in State A purchases vacant A land, to be held for a future expansion project.

h.

A business based in State A purchases repair services from an A plumbing contractor.

1931. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question PR #16
Hambone Corporation is subject to the State E capital stock tax. The tax is levied at 2% of the entity’s net worth that is apportioned to E. Hambone conducts 30% of its operations in E. Hambone’s current book balance sheet is as follows, with amounts in millions. Compute Hambone’s liability for the E capital stock tax.

Cash

$ 10

Payables

$ 30

Receivables

50

Mortgages, principal

400

Equipment, net of accumulated
depreciation

140

Common stock

10

Buildings, net of accumulated
depreciation

300

Additional paid-in capital

160

Land

200

Retained earnings

100

Total assets

$700

Total liabilities and equity

$700

1932. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question PR #17
Hermann Corporation is based in State A (corporate income tax rate 10%). It sells its goods to customers in both A and State B (corporate income tax rate 4%). Hermann’s state taxable income for the year is $1 million, 30% of which relates to B customers. Hermann’s level of activities in B is insufficient to create nexus there, but A has adopted a throwback rule as to multistate sales. Would Hermann reduce its total state income tax liability by creating nexus with B, say by allowing its sales force to make credit decisions? Elaborate.

1933. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #1
A local business wants your help in making a decision about a large capital investment. Should your advice concentrate on tax or non-tax implications of the decision?

1934. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #2
Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice. On which issues, if any, are the tax bases and procedures likely to overlap?

1935. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #3
Compost Corporation has finished its computation of Federal taxable income. In State Q, the derivation of state corporate taxable income starts with the Federal amount and makes a number of modifications. List at least five such modifications that Compost is likely to encounter.

1936. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #4
A number of court cases in the last several decades have involved the application of a state’s nexus rules concerning a business taxpayer. What is the significance of the term nexus when discussing state income taxation?

1937. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #5
Discuss how a multistate business divides up its corporate taxable income among the states in which it operates. Hint: use the terms allocation and apportionment in your comments.

1938. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #6
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.

1939. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #7
You attend a tax webinar in which the presenter mentions the “ultimate destination concept.” Define this term, and identify at least two of the most important exceptions to the general rule.

1940. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #8
List which items are included in the payroll factor of a state. Consider all forms of compensation that an employee might receive. Apply the general UDITPA rules.

1941. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #9
Sylvia spends time working at the offices of her employer as a consultant to clients who are located in three different U.S. states. To which state(s)’ payroll factor(s) is Sylvia’s compensation assigned? Apply the general UDITPA rules.

1942. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #10
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.

1943. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #11
Identify some state/local income tax issues facing pass-through entities such as S corporations, partnerships, and LLCs.

1944. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #12
The sales/use tax that is employed by most U.S. states does not fall on all retail transactions. Identify at least five sales/use tax exemptions that states often allow, eliminating certain transactions from the tax base.

1945. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #13
Summarize the principles of multistate tax planning.

1946. CHAPTER 16—MULTISTATE CORPORATE TAXATION Question ES #14
Your client wants to reduce its overall state/local income tax rate. It holds income-producing assets of various types, including tangible personal property, rental land and buildings, and high-yield stocks and bonds. How might this taxpayer restructure its operations to achieve the desired tax result?