Question 1

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.
​ $$\begin{array} { l r r r } 
& \text { State A } & \text { State B } & \text { Total } \
\text { Sales } & \$ 500,000 & \$ 1,500,000 & \$ 2,000,000 \
\text { Property } & 250,000 & - 0 - & 250,000 \
\text { Payroll } & 200,000 & 300,000 & 500,000
\end{array}$$ ​
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.

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The answer of Dott Corporation generated $300,000 of state taxable...

Question 2

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 sales tax. $$\begin{array} { l r } 
\text {Sales to L residents }&\$600,000\
\text { Sales to homeless shel ter operated by a local church } & 80,000 \
\text { Sales to residents who cross the border from nearby State M } & 100,000 \
\text { Sales to a similar merchandiser, located in another L town } & 20,000
\end{array}$$

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The answer of Pail Corporation is a merchandiser. It purchases...

Question 3

The ____________________ tax usually is applied at the city or county level, as its main source of revenue.

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Question 4

The ____________________ tax levied by a state usually is based on the book value of a corporation's "net worth."

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Question 5

An ad valorem property tax is based on the asset's current ____________________.

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Question 6

You are completing the State A income tax return for Quaint Company, LLC. Quaint operates in various states, showing the following results. $\begin{array}{lr}
\text { Ordinary income } & \$ 800,000 \
\text { Net capital loss } & (60,000) \
\text { Interest income, IBM bond } & 40,000
\end{array}$ In A, all interest is treated as apportionable income. A uses a sales-only apportionment factor. Compute Quaint's A taxable income.
​ $$\begin{array} { l r r r } 
& \text { State A } & \text { All Other States } & \text { T otal } \
\text { Sales } & \$ 800,000 & \$ 1,200,000 & \$ 2,000,000 \
\text { Property (average cost) } & 250,000 & 2,000,000 & 2,250,000 \
\text { Payroll } & 300,000 & 700,000 & 1,000,000
\end{array}$$

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The answer of You are completing the State A income...

Question 7

A ____________________ tax is designed to complement the local sales tax structure, to prevent the consumer from making no- or low-tax purchases in another state, outside the U.S., or online, and then bringing the asset into the state.

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Question 8

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 State E. Hambone's current book balance sheet is as follows, with amounts in millions. Compute Hambone's liability for the E capital stock tax. $\begin{array}{lrlr}
\text { Cash } & \$ 40 & \text { Payables } & \$ 50 \
\text { Receivables } & 20 & \text { Mortgages, principal } & 400\
\text { Equipment, net of accumulated }&140& \text { Common stock}&10\
 \text {depreciation}\
 \text {Buildings, net of accumulated}&300& \text {Additional paid-in capital}&190\
 \text {depreciation}\
\text { Land } & \underline{250} & \text { Retained earnings } & 100 \
\text { Total assets } & \underline{\mathbf{\$ 7 5 0}} & \text { Total liabilities and equity } & \underline{\mathbf{\$ 7 5 0}}
\end{array}$

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The answer of Hambone Corporation is subject to the State...

Question 9

If a gift card is unused after a specified period of time, the state can collect the amount of the card proceeds from the seller, as ____________________ property.

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Question 10

Mercy Corporation, headquartered in State F, sells wireless computer devices, including keyboards and bar code readers. Mercy's degree of operations is sufficient to establish nexus only in States 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. $$\begin{array} { l l r } 
\text { Customer } & \text { Customer's Location } & \text { This Year's Sales } \
\text { NorCo } & \text { E } & \$ 60,000,000 \
\text { Tools, Inc. } & \text { F } & 20,000,000 \
\text { UniBell } & \text { G } & 50,000,000 \
\text { U.S. Department of Defense } & \text { All } 50 \text { U.S. States } & 20,000,000 \
\text { Total } & & \mathbf { \$ 1 5 0 , 0 0 0 , 0 0 0 }
\end{array}$$

Accepted Answer

The answer of Mercy Corporation, headquartered in State F, sells...

Question 11

Determine Drieser's sales factors for States K, M, and N.
Drieser Corporation's manufacturing facility, distribution center, and retail store are located in State K. Drieser 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 Drieser's sales representative, who has the authority to solicit, accept, and approve sales orders in State M. Residents of N can purchase Drieser's product only if they place an order online and arrange to take delivery of the product at Drieser's shipping dock.
Drieser's sales this year were reported as follows. $$\begin{array} { l r } 
\text { Sales to residents of State K } & \$ 1,000,000 \
\text { Sales to residents of State M } & 600,000 \
\text { Sales to residents of State N } & 900,000 \
\text { Total } & \underline { \mathbf { 2  } , \mathbf { 0 0 0 , 0 0 0 } }
\end{array}$$ Drieser'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. State K sources dock sales to the destination state.

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Question 12

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.
​ $$\begin{array} { l r r r } 
& \text { State A } & \text { State B } & \text { Total } \
\text { Sales } & \$ 800,000 & \$ 200,000 & \$ 1,000,000 \
\text { Property } & 300,000 & - 0 - & 300,000 \
\text { Payroll } & 200,000 & 800,000 & 1,000,000
\end{array}$$ ​
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.

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Question 13

The sale of groceries to an individual probably is exempt from sales/use tax under the _________________________ rule.

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Question 14

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.
​ $$\begin{array} { l r r r } 
& \text { State D } & \text { State E } & \text { T otal } \
\text { Sales of paper products } & \$ 4,500,000 & \$ 1,500,000 & \$ 6,000,000 \
\text { Property } & 3,500,000 & 2,500,000 & 6,000,000 \
\text { Payroll } & 1,500,000 & 1,000,000 & 2,500,000
\end{array}$$ ​
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.

Accepted Answer

The answer of Milt Corporation owns and operates two facilities...

Question 15

Garcia Corporation is subject to tax in States G, H, and I. Garcia's compensation expense includes the following. $$\begin{array} { l r r r r } 
& \text { State G } & \text { State H } & \text { State I } & \text { T otal } \
\text { Salaries and wages for nonofficers } & \$ 600,000 & \$ 500,000 & \$ 500,000 & \$ 1,600,000 \
\text { Officers' salaries } & - 0 - & - 0 - & 800,000 & 800,000
\end{array}$$ Officers' salaries are included in the payroll factor for States G and H, but not for I. Compute Garcia's payroll factors for G, H, and I.

Accepted Answer

The answer of Garcia Corporation is subject to tax in...

Question 16

Kim Corporation, a calendar year taxpayer, has manufacturing facilities in States A and B. A summary of Kim's property holdings follows.  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.

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The answer of Kim Corporation, a calendar year taxpayer, has...

Question 17

Flip 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 Flip's sales factor for the year. Both states follow the UDITPA and the MTC regulations in this regard. $\begin{array}{lrr}
&\text { State A}&\text { State B}\
\text { Gross sales to purchasers in state } & \$ 420,000 & \$ 360,000 \
\text { Sales returns } & 9,000 & 11,000 \
\text { Discounts allowed } & 21,000 & 31,000 \
\text { Rental income } & 60,000 * & 25,000 * *
\end{array}$
 ?
* Excess warehouse space, seasonal rental to a competitor.
** Land held for speculation.

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Question 18

A state might levy a(n) ____________________ tax when an investor sells shares of stock.

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Question 19

Compute Still Corporation's State Q taxable income and tax liability for the year. $$\begin{array} { l r } 
\text { Addition modifications } & \$ 70,000 \
\text { Allocated income - total } & \$ 80,000 \
\text { Allocated income - State Q } & \$ 60,000 \
\text { Allocated income - State P } & \$ 20,000 \
\text { Apporti onment percentage - State Q } & 40 \% \
\text { Federal taxable income } & \$ 500,000 \
\text { State tax credits } & \$ 11,000 \
\text { Subtraction modifications } & \$ 30,000 \
\text { Tax rate } & 5 \%
\end{array}$$

Accepted Answer

The answer of Compute Still Corporation's State Q taxable income...

Question 20

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 $2,000,000 from its business, municipal bond interest of $150,000, taxable interest of $150,000, 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.

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The answer of Troy, an S corporation, is subject to...

Quiz 16: Multi-State Corporate Taxations