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Question;1831. Question;MC #1;Norman Corporation owns and operates two manufacturing facilities, one in State;X and the other in State Y. Due to a temporary decline in the corporation?s;sales, Norman has rented 20% of its Y facility to an unaffiliated corporation.;Norman generated $1,000,000 net rental income and $2,000,000 income from;manufacturing.;Norman is incorporated in Y. For X and Y purposes, rental income is classified;as allocable nonbusiness income. By applying the statutes of each state, Norman;determined that its apportionment factors are.65 for X and.35 for Y.;Norman?s income attributed to X is;a.;$0.;b. $1,000,000.;c. $1,300,000.;d. $2,000,000.;e. $3,000,000.;1832. Question;MC #2;Wailes Corporation is subject to a corporate income tax only in State X. The;starting point in computing X taxable income is Federal taxable income. Wailes?;Federal taxable income is $750,000, which includes a $75,000 deduction for;state income taxes. During the year, Wailes received $20,000 interest on;Federal obligations. X tax law does not allow a deduction for state income tax;payments.;Wailes? taxable income for X purposes is;a.;$825,000.;b. $805,000.;c. $750,000.;d. $680,000.;1833. Question;MC #3;Perez Corporation is subject to tax only in State A. Perez generated the;following income and deductions.;Federal taxable income;$500,000;State A income tax expense;50,000;Depreciation allowed for Federal tax purposes;300,000;Depreciation allowed for state tax purposes;400,000;Federal taxable income is the starting point in computing A taxable income.;State income taxes are not deductible for A tax purposes. Perez?s A taxable;income is;a.;$400,000.;b. $450,000.;c. $600,000.;d. $650,000.;1834. Question;MC #4;In determining a corporation?s taxable income for state income tax purposes;which of the following does not;constitute a subtraction from Federal income?;a.;Interest on U.S. obligations.;b. Expenses that are directly or;indirectly related to state and municipal interest that is taxable for state;purposes.;c. The amount by which the Federal;deduction for depreciation exceeds the depreciation deduction permitted for;state tax purposes.;d. The amount by which the state loss;from the disposal of assets exceeds the Federal loss from such disposal.;1835. Question;MC #5;In determining state taxable income, all of the following are adjustments to;Federal income except;a.;A Federal net operating loss.;b. Federal income tax expense.;c. Dividends received from other U.S.;corporations.;d. Wages paid to officers and;executives.;1836. Question;MC #6;Bulky Company sold an asset on the first day of the tax year for $500,000.;Bulky?s Federal tax basis for the asset was $300,000. Because of differences in;cost recovery schedules, the state regular-tax basis in the asset was $375,000.;What adjustment, if any, should be made to Bulky?s Federal taxable income in;determining the correct taxable income for the typical state?;a.;$75,000.;b. $25,000.;c. ($75,000).;d. $0.;1837. Question;MC #7;Federal taxable income is used as the starting point in computing the state?s;income tax base, but numerous state adjustments or modifications generally are;required to;a.;Reflect differences between state and Federal tax statutes.;b. Remove income that a state is;constitutionally prohibited from taxing.;c. Allow for all of the states to use;the same definition of taxable income.;d. a. and b.;1838. Question;MC #8;The model law relating to the assignment of income among the states for;corporations is;a.;The Multistate Tax Treaty.;b. The Uniform Division of Income for;Tax Purposes Act (UDITPA).;c. Public Law 86-272.;d. The Multistate Tax Commission (MTC).;1839. Question;MC #9;Under P.L. 86-272, which of the following transactions by itself would create;nexus with a state?;a.;Order solicitation for a computer, approved and filled from another state.;b. Order solicitation for a marketable;security, approved, and filled from another state.;c. Order solicitation for a machine;with credit approval from another state.;d. The conduct of a training seminar for;customers as to how to install and operate a new software product.;1840. Question;MC #10;Under P.L. 86-272, which of the following transactions by itself would create;nexus with a state?;a.;Inspection by a sales employee of the customer?s inventory for specific product;lines.;b. Using an independent contractor who;acts as a manufacturer?s representative for the taxpayer through a sales office;in the state.;c. Executing a sales campaign, using an;advertising agency acting as an independent contractor for the taxpayer.;d. Maintenance of inventory in the state;by an independent contractor under a consignment plan.;1841. Question;MC #11;Which of the following is not immune;from state income taxation, even if P.L. 86-272 is in effect?;a.;Sale of the rights associated with a patent used in the taxpayer?s business.;b. Sale of office equipment that;constitutes inventory to the purchaser.;c. Sale of office equipment to be used;in the taxpayer?s business.;d. All of the above are protected by;P.L. 86-272 immunity provisions.;1842. Question;MC #12;Kurt Corporation realized $900,000 taxable income from the sales of its;products in States X and Z. Kurt?s activities establish nexus for income tax;purposes in both states. Kurt?s sales, payroll, and property among the states;include the following.;State;X;State;Z;Totals;Sales;$2,000,000;$2,000,000;$4,000,000;Property;2,000,000;?0?;2,000,000;Payroll;1,000,000;?0?;1,000,000;Z utilizes an equally weighted three-factor apportionment formula. Kurt is;incorporated in X. How much of Kurt?s taxable income is apportioned to Z?;a.;$0.;b. $150,000.;c. $900,000.;d. $2,000,000.;1843. Question;MC #13;Jos? Corporation realized $600,000 taxable income from the sales of its;products in States X and Z. Jos??s activities in both states establish nexus;for income tax purposes. Jos??s sales, payroll, and property among the states;include the following.;State;X;State;Z;Totals;Sales;$1,500,000;$1,000,000;$2,500,000;Property;500,000;?0?;500,000;Payroll;1,500,000;?0?;1,500,000;Z utilizes a double-weighted sales factor in its three-factor apportionment;formula. How much of Jos??s taxable income is apportioned to Z?;a.;$600,000.;b. $120,000.;c. $80,000.;d. $0.;1844. Question;MC #14;Jos? Corporation realized $600,000 taxable income from the sales of its;products in States X and Z. Jos??s activities in both states establish nexus;for income tax purposes. Jos??s sales, payroll, and property among the states;include the following.;State;X;State;Z;Totals;Sales;$1,500,000;$1,000,000;$2,500,000;Property;500,000;?0?;500,000;Payroll;1,500,000;?0?;1,500,000;X utilizes an equally weighted three-factor apportionment formula. How much of;Jos??s taxable income is apportioned to X?;a.;$600,000.;b. $520,200.;c. $200,000.;d. $79,800.;1845. Question;MC #15;Mandy Corporation realized $1,000,000 taxable income from the sales of its;products in States X and Z. Mandy?s activities establish nexus for income tax;purposes only in Z. Mandy?s sales, payroll, and property among the states;include the following.;State;X;State;Z;Totals;Sales;$1,000,000;$2,000,000;$3,000,000;Property;2,000,000;500,000;2,500,000;Payroll;1,000,000;1,000,000;2,000,000;X utilizes a sales-only factor in its three-factor apportionment formula. How;much of Mandy?s taxable income is apportioned to X?;a.;$0.;b. $333,333.;c. $543,333.;d. $1,000,000.;1846. Question;MC #16;Helene Corporation owns manufacturing facilities in States A, B, and C. A uses;a three-factor apportionment formula under which the sales, property and;payroll factors are equally weighted. B uses a three-factor apportionment;formula under which sales are double-weighted. C employs a single-factor;apportionment factor, based solely on sales.;Helene?s operations generated $1,000,000 of apportionable income, and its sales;and payroll activity and average property owned in each of the three states is;as follows.;State;A;State;B;State;C;Totals;Sales;$450,000;$750,000;$300,000;$1,500,000;Payroll;100,000;150,000;50,000;300,000;Property;200,000;200,000;200,000;600,000;Helene?s apportionable income assigned to A is;a.;$422,200.;b. $333,333.;c. $322,200.;d. $316,500.;e. $300,000.;1847. Question;MC #17;Simpkin Corporation owns manufacturing facilities in States A, B, and C. A uses;a three-factor apportionment formula under which the sales, property and;payroll factors are equally weighted. B uses a three-factor apportionment;formula under which sales are double-weighted. C employs a single-factor;apportionment factor, based solely on sales.;Simpkin?s operations generated $1,000,000 of apportionable income, and its;sales and payroll activity and average property owned in each of the three;states is as follows.;State;A;State;B;State;C;Totals;Sales;$450,000;$750,000;$300,000;$1,500,000;Payroll;100,000;150,000;50,000;300,000;Property;200,000;200,000;200,000;600,000;Simpkin?s apportionable income assigned to B is;a.;$611,100.;b. $600,000.;c. $500,000.;d. $458,300.;e. $444,400.;1848. Question;MC #18;Cruz Corporation owns manufacturing facilities in States A, B, and C. A uses a;three-factor apportionment formula under which the sales, property and payroll;factors are equally weighted. B uses a three-factor apportionment formula under;which sales are double-weighted. C employs a single-factor apportionment;factor, based solely on sales.;Cruz?s operations generated $1,000,000 of apportionable income, and its sales;and payroll activity and average property owned in each of the three states is;as follows.;State;A;State;B;State;C;Totals;Sales;$450,000;$750,000;$300,000;$1,500,000;Payroll;100,000;150,000;50,000;300,000;Property;200,000;200,000;200,000;600,000;Cruz?s apportionable income assigned to C is;a.;$1,000,000.;b. $430,542.;c. $333,333.;d. $200,000.;e. $0.;1849. Question;MC #19;Boot Corporation is subject to income tax in States A and B. Boot?s operations;generated $200,000 of apportionable income, and its sales and payroll activity;and average property owned in each of the states is as follows.;State;A;State;B;Totals;Sales;$200,000;$600,000;$800,000;Payroll;100,000;50,000;150,000;Property;200,000;50,000;250,000;How much more (less) of Boot?s income is subject to A income tax if, instead of;using an equally-weighted three-factor apportionment formula, A uses a formula;with a double-weighted sales factor?;a.;($50,000).;b. $50,000.;c. $16,100.;d. ($16,100).;1850. Question;MC #20;General Corporation is taxable in a number of states. This year, General made a;$100,000 sale from its A headquarters to an agency of the U.S. government.;State A applies a throwback rule. In which state(s) will the sale be included;in the sales factor numerator?;a.;$100,000 in A.;b. $50,000 in A, with the balance;exempted from other states? sales factors under the Colgate doctrine.;c. $0 in A.;d. In all of the states, according to;the apportionment formulas of each, as the U.S. government is present in all;states.;1851. Question;MC #21;General Corporation is taxable in a number of states. This year, General made a;$100,000 sale from its A headquarters to a State B office of an agency of the;U.S. government. General has not established nexus with B. State A does not;apply a throwback rule. In which state(s) will the sale be included in the;sales factor numerator?;a.;In all of the states, according to the apportionment formulas of each, as the;U.S. government is present in all states.;b. $100,000 in A.;c. $100,000 in B.;d. $0 in both A and B.;1852. Question;MC #22;General Corporation is taxable in a number of states. This year, General made a;$100,000 sale from its A headquarters to a customer in B. This activity is not;sufficient for General to create nexus with B. State A applies a throwback;rule, but State B does not. In which state(s) will the sale be included in the;sales factor numerator?;a.;$0 in both A and B.;b. $100,000 in A.;c. $100,000 in B.;d. In both A and B, according to the;apportionment formulas of each.;1853. Question;MC #23;General Corporation is taxable in a number of states. This year, General made a;$100,000 sale from its A headquarters to a customer in B. This activity is not;sufficient for General to create nexus with B. State B applies a throwback;rule, but State A does not. In which state(s) will the sale be included in the;sales factor numerator?;a.;$0 in both A and B.;b. $100,000 in A.;c. $100,000 in B.;d. In both A and B, according to the;apportionment formulas of each.;1854. Question;MC #24;Britta Corporation?s entire operations are located in State A. Eighty percent;($800,000) of Britta?s sales are made in A and the remaining sales ($200,000);are made in State B. B has not adopted a corporate income tax. If A has adopted;a throwback rule, the numerator of Britta?s A sales factor is;a.;$0.;b. $200,000.;c. $800,000.;d. $1,000,000.;1855. Question;MC #25;The throwback rule requires that;a.;Sales of tangible personal property are attributed to the state where they;originated, if the taxpayer is not taxable in the state of destination.;b. Sales of tangible personal property;are attributed to the seller?s state, even if the taxpayer is not taxable in;the state of destination.;c. Sales of services are attributed to;the state of commercial domicile.;d. Capital gain/loss is attributed to;the state of commercial domicile.;1856. Question;MC #26;Given the following transactions for the year, determine Comp Corporation?s D;payroll factor denominator. State D has adopted the principles of UDITPA.;Compensation of sales force;$ 700,000;Compensation paid to independent contractors;100,000;Compensation paid to managers of nonbusiness;rental property;200,000;Total compensation;$1,000,000;a.;$700,000.;b. $800,000.;c. $900,000.;d. $1,000,000.;1857. Question;MC #27;Judy, a regional sales manager, has her office in State X. Her region includes;several states, as indicated in the sales report below. Determine how much of;Judy?s $200,000 compensation is assigned to the payroll factor of State X.;State;Sales;Generated;Judy?s;Time Spent There;U;$1,000,000;15%;V;5,000,000;45%;X;2,000,000;40%;$8,000,000;100%;a.;$0.;b. $66,667.;c. $80,000.;d. $200,000.;1858. Question;MC #28;Trayne Corporation?s sales office and manufacturing plant are located in State;X. Trayne also maintains a manufacturing plant and sales office in State W. For;purposes of apportionment, X defines payroll as all compensation paid to;employees, including elective contributions to ? 401(k) deferred compensation;plans. Under the statutes of W, neither compensation paid to officers nor contributions;to ? 401(k) plans are included in the payroll factor. Trayne incurred the;following personnel costs.;State;X;State;W;Totals;Wages and salaries for employees other;than;officers;$ 500,000;$200,000;$ 700,000;Salaries for officers;300,000;300,000;Contributions to ? 401(k) plans;200,000;50,000;250,000;Totals;$1,000,000;$250,000;$1,250,000;Trayne?s payroll factor for State X is;a.;100.00%.;b. 80.00%.;c. 73.68%.;d. 71.43%.;e. 50.00%.;1859. Question;MC #29;Net Corporation?s sales office and manufacturing plant are located in State X.;Net also maintains a manufacturing plant and sales office in State W. For;purposes of apportionment, X defines payroll as all compensation paid to;employees, including contributions to ? 401(k) deferred compensation plans.;Under the statutes of W, neither compensation paid to officers nor;contributions to ? 401(k) plans are included in the payroll factor. Net;incurred the following personnel costs.;State;X;State;W;Totals;Wages and salaries for employees other;than;officers;$ 500,000;$200,000;$ 700,000;Salaries for officers;300,000;300,000;Contributions to ? 401(k) plans;200,000;50,000;250,000;Totals;$1,000,000;$250,000;$1,250,000;Net?s payroll factor for State W is;a.;50.00%.;b. 28.57%.;c. 26.32%.;d. 20.00%.;e. 0%.;1860. Question;MC #30;Bert Corporation, a calendar-year taxpayer, owns property in States M and O.;Both M and O require that the average value of assets be included in the;property factor. M requires that the property be valued at its historical cost;and O requires that the property be included in the property factor at its net;depreciated book value.;Account;Balances at Beginning of Year;State;M;State;O;Totals;Inventories;$200,000;$300,000;$ 500,000;Building & machinery (cost);700,000;300,000;1,000,000;Accumulated depreciation;(150,000);(50,000);(200,000);Land;400,000;200,000;600,000;Totals;$1,150,000;$750,000;$1,900,000;Account;Balances at Year-End;State;M;State;O;Totals;Inventories;$ 400,000;$100,000;$ 500,000;Building & machinery (cost);800,000;500,000;1,300,000;Accumulated depreciation;(300,000);(100,000);(400,000);Land;400,000;200,000;600,000;Totals;$1,300,000;$700,000;$2,000,000;Annual rent payments;$ 50,000;$ 25,000;Bert?s M property factor is;a.;75.0%.;b. 66.7%.;c. 64.9%.;d. 64.5%.;1861. Question;MC #31;Valdez Corporation, a calendar-year taxpayer, owns property in States M and O.;Both M and O require that the average value of assets be included in the;property factor. M requires that the property be valued at its historical cost;and O requires that the property be included in the property factor at its net;depreciated book value.;Account;Balances at Beginning of Year;State;M;State;O;Totals;Inventories;$ 200,000;$300,000;$ 500,000;Building & machinery (cost);700,000;300,000;1,000,000;Accumulated depreciation;(150,000);(50,000);(200,000);Land;400,000;200,000;600,000;Totals;$1,150,000;$750,000;$1,900,000;Account;Balances at Year-End;State;M;State;O;Totals;Inventories;$ 400,000;$100,000;$ 500,000;Building & machinery (cost);800,000;500,000;1,300,000;Accumulated depreciation;(300,000);(100,000);(400,000);Land;400,000;200,000;600,000;Totals;$1,300,000;$700,000;$2,000,000;Valdez?s O property factor is;a.;35.0%.;b. 37.2%.;c. 39.5%.;d. 53.8%.;1862. Question;MC #32;In the broadest application of the unitary theory, the U.S. unitary business;files a combined tax return using factors and income amounts for all;affiliates;a.;Organized in the U.S.;b. Organized in NAFTA countries.;c. Organized anywhere in the world.;d. As dictated by the tax treaties;between the U.S. and the other countries.;1863. Question;MC #33;A taxpayer wishing to reduce the negative tax effects of the application of the;unitary theory might;a.;Affiliate with a service division that shows an operating loss, like one in;research and development.;b. Acquire a unitary affiliate in a;country with a high wage structure.;c. Add a profitable entity to the;unitary group.;d. a. and b.;1864. Question;MC #34;Peete Corporation is subject to franchise tax in State Z. The tax is imposed at;a rate of 2% of the taxpayer?s net worth that is apportioned to the state by;use of a two factor (sales and property equally weighted) formula. The property;factor includes real and tangible personal property, valued at net book value;at the end of the taxable year.;Eighty percent of Peete?s sales are attributable to Z, and $200,000 of the net;book value of Peete?s tangible personal property is located in Z.;Determine the Z franchise tax payable by Peete this year, given the following;end-of-the year balance sheet.;Cash;$ 100,000;Equipment;$800,000;Accumulated depreciation;(200,000);600,000;Furniture and fixtures;$150,000;Accumulated depreciation;(50,000);100,000;Intangible assets;200,000;Total assets;$1,000,000;Accounts and taxes payable;$ 250,000;Long-term debt;300,000;Common stock;10,000;Additional paid-in capital;500,000;Retained earnings;(60,000);Total liabilities and equity;$1,000,000;a.;$0, due to the negative retained earnings.;b. $20,000.;c. $7,200.;d. $4,860.;1865. Question;MC #35;When the taxpayer has exposure to a capital stock tax;a.;The pricing of inventory sales should reflect no more than inflation increases.;b. Subsidiary operations should be;funded through direct capital contributions.;c. Expansions should be funded with;retained earnings.;d. Dividends should be paid regularly to;a parent based in a low-tax state.

 

Paper#59250 | Written in 18-Jul-2015

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