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tax problems - questin and answer,.,. ch 24




Question;1. LO.1 You are working with the top management of one of your clients in selecting the U.S. location for a new manufacturing operation. Craft a plan for the CEO to use in discussions with the economic development representatives of several candidate states. In no more than two PowerPoint slides, list some of the tax incentives the CEO should request from a particular state during the negotiations. Be both creative and aggressive in the requests.2. LO.1 Complete the following chart by indicating whether each item is true or false.Explain your answers by referencing the overlap of rules appearing in Federal and most state income tax laws.Item True or Falsea. Most of the states start with Federal taxable income in computing state taxable income (i.e., taxable income is ?piggybacked? with the Federal amount). ___________b. The states use a wide variety of rules to compute corporate taxable income, thus, there is no ?typical? state income tax computation. ___________c. State rules as to which entities can join in a consolidated return match those of Federal law. ___________d. The corporate income tax systems of most states can be described as having progressive rate structures. ___________e. A typical state income tax credit would equal 10% of the costs incurred to purchase and install solar energy panels for an existing factory. ___________3. LO.2 In no more than three PowerPoint slides, list some general guidelines that a taxpayer can use to determine whether it has an obligation to file an income tax return with a particular state. (Hint: Correctly use the terms nexus and domicile in your answer.)4. LO.2 Josie is a sales representative for Talk2Me, a communications retailer based in Fort Smith, Arkansas. Josie?s sales territory is Oklahoma, and she regularly takes day trips to Tulsa to meet with customers.During a typical sales call, Josie takes the customers? current orders and, using her wireless phone, sends the orders to headquarters in Fort Smith for immediate action.Approved orders are shipped from the Little Rock warehouse.Are Josie?s sales subject to the Oklahoma corporate income tax? Explain.5. LO.2 Continue with the facts of Question 4. Cheap Phones, one of Josie?s customers who is facing tight cash flow problems, wants to return about 100 defective cell phones. Talk2Me tells Josie to bring the phones back to headquarters. Fearing that she will lose Cheap Phones as a customer if she does not comply with the request, Josie says, ?Let me save you the time and cost of packing and shipping the defective phones. Put them in the trunk of my car, and I?ll take them back.? Does Josie?s action change the answer to Question 4? Why or why not?6. LO.3 Albro, a C corporation, makes profitable sales in about a dozen U.S. states.It owns a headquarters building in one of those states and a fulfillment center in a different state. How does Albro determine the amounts of gross and taxable income that are subject to tax in each of the states in which it operates. (Hint: Correctly use the terms allocate and apportion in your answer.)7. LO.3 Indicate whether each of the following items should be allocated or apportioned by the taxpayer in computing state corporate taxable income. Assume that the state follows the general rules of UDITPA.a. Profits from sales activities.b. Profits from consulting and other service activities.c. Losses from sales activities.d. Profits from managing the stock portfolio of a client.e. Profits from managing one?s own stock portfolio.f. Gain on the sale of a plot of land held by a real estate developer.g. Gain on the sale of a plot of land held by a manufacturer, on which it may expand its factory.h. Rent income received by a manufacturer from the leasing of space to a supplier.8. LO.3 Regarding the apportionment formula used to compute state taxable income, does each of the following independent characterizations describe a taxpayer that is based in state or out of state? Explain.a. The sales factor is positively correlated with the payroll, but not the property, factor.b. The sales factor is much higher than the property and payroll factors.c. The property and payroll factors are much higher than those for other nexus states.d. The sales and payroll factors are low, but the property factor is very high.e. The sales factor is remaining constant, but the payroll factor is decreasing.9. LO.5 The trend in state income taxation is to move from an equal three-factor apportionment formula to a formula that places extra weight on the sales factor. Several states now use sales-factor-only apportionment. Explain why this development is attractive to the taxing states.10. LO.5 In computing the corporate income taxes for Iowa-based SpillCo, should a single large sale in August, in which merchandise was shipped to a customer in Kentucky, be included in the Iowa sales factor?11. LO.5 Continue with the facts of Question 10. Another large shipment was made in May to a customer in South Dakota, a state that does not impose any corporate income tax.Is this sale to be included in SpillCo?s Iowa sales factor? Explain.12. LO.5 Megan is an accountant for KnoxCo. She is a telecommuter and works most days from her home in Tennessee. Twice a month, she travels to Georgia for a staff meeting at the employer?s Atlanta headquarters. In which state?s payroll factor should Megan?s compensation be included if:a. Megan is an employee and is covered by the qualified retirement plan of her Atlanta employer?b. Megan works as an independent contractor for several clients, including the Atlantabased firm?c. Megan is an employee, and for one day each month, she provides accounting services for KnoxCo?s Memphis rental properties?13. LO.5 Keystone, your tax consulting client, is considering an expansion program that would entail the construction of a new logistics center in State Q. List at least five questions you should ask in determining whether an asset that is owned by Keystone is to be included in State Q?s property factor numerator.14. LO.6 The trend in state income taxation is for states to adopt a version of the unitary theory of multijurisdictional taxation in their statutes and regulations.a. Explain why some states are attracted to the unitary theory and a combined reporting scheme of multistate income taxation.b. Is the application of the unitary theory a help or a detriment to the taxpayer? Why?


Paper#38709 | Written in 18-Jul-2015

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