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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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