Question;15. LO.6 State A enjoys a prosperous economy, with high real estate values and compensation levels. State B?s economy has seen better days?property values are depressed, and unemployment is higher than in other states. Most consumer goods are priced at about 10% less in B than in A. Both A and B apply unitary income taxation to businesses that operate within the state. Does unitary taxation distort the assignment of taxable income between A and B? Explain.16. LO.6 Your client makes the comment ?Unitary corporate income taxation is a bad idea for the business community.? Is her characterization correct? Elaborate.17. LO.6 Carmina operates a multinational business from Colorado, a state that applies the unitary theory and requires combined state income tax reporting. Most of her off-shore customers are located in the United Kingdom and Germany, where sales prices and property valuations are relatively high. Make a recommendation as to how Carmina might reduce her Colorado income tax liabilities. (Hint: There is an attractive unitary tax election that Carmina should consider.)18. LO.7 Chip and Dale are the only shareholders of VisitTime, a medical transportation firm that is organized in State P as an S corporation. VisitTime is considering making quarterly estimated income tax payments, related to Chip?s stock ownership, to bothState P and State Q (the neighboring state in which Chip lives). Explain.19. LO.7 The Quail LLC operates solely in State W. As a pass-through entity, Quail does not pay any entity-level W taxes. Evaluate this statement. 20. LO.8 HernandezCo sells women?s clothing online and in its State F stores. It wants to avoid the creation of sales/use tax nexus with State G. HernandezCo sales representatives believe that they will lose customers from State G because of an increase in their products? prices due to the new tax obligations. Are the sales representatives correct to be concerned about their employer?s sales/use tax issue? Why or why not?21. LO.8 Create a PowerPoint outline describing the major exemptions and exclusions from the sales/use tax base of most states. Use your slides to discuss this topic with your accounting students? club.22. LO.8 Historically, the Federal government has levied income and excise taxes as well as tariffs and duties for imported and exported goods. State and local governments have used a different set of taxes to meet their fiscal needs. List at least three taxes a state/ local government, and not the Federal government, might levy.23. LO.8 Your client, HillTop, is a retailer of women?s clothing. It has increased sales during the holiday season by advertising gift cards for in-store and online use. HillTop has found that gift card holders who come into the store tend to purchase goods that total more than the amount of the gift card. Further, about one-third of the gift cards are never redeemed, thereby yielding cash to the company without a reduction of inventory.What are the tax issues confronting HillTop related to the gift cards?24. LO.2, 9 Your client, Ecru Limited, uses a small sales force to solicit sales of its wholesale restaurant supplies. Ecru is based in State W, and the sales representatives are assigned territories in States X, Y, and Z. Ecru owns no property and employs no other personnel outside of W.As Ecru?s tax adviser, you are to write a policy manual listing various ?do?s and don?ts? for the sales personnel so that Ecru does not create income tax nexus with X, Y, and Z.To prepare for your assignment, write a memo for the tax research file, summarizing the rules as to the ability of a corporation to terminate or create income tax nexus. Make certain you discuss the Wrigley case in your analysis.25. LO.9 As the director of the multistate tax planning department of a consulting firm, you are developing a brochure to highlight the services it can provide. Part of the brochure is a list of five or so key techniques that clients can use to reduce state income tax liabilities. Develop this list for the brochure. Consider only income tax consequences in your analysis. Prepare a written memo summarizing these services.
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