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Exam 16: Multijurisdictional Taxation

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Question 1

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Typical indicators of income-tax nexus include the presence of customers in the state.

A) True
B) False

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Question 2

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Unused foreign tax credits are carried back two years and then forward 20 years.

A) True
B) False

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Question 3

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Compost Corporation has finished its computation of Federal taxable income. In State Q, the derivation of state corporate taxable income starts with the Federal amount and makes a number of modifications. List at least five such modifications that Compost is likely to encounter. In this regard, follow the general UDITPA rules, and list both addition and subtraction modifications.

A typical state taxable income addition modification is for the Federal income tax paid for the tax year.

All of the U.S. states use an apportionment formula based on the sales, property, and payroll factors.

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. ​ Cruz's apportionable income assigned to C is:

Provide the required information for Orange Corporation, whose Federal taxable income totals $100 million. Orange apportions 70% of its business income to State C. Orange generates $10 million of nonbusiness income each year. Forty percent of that income is attributable to rentals of buildings located in C. Orange's business income this year totals $90 million. a.State C taxes how much of Orange's business income? b.State C taxes how much of Orange's nonbusiness income? c.Explain your results.

Wellington, Inc., a U.S. corporation, owns 30% of a CFC that has $50 million of earnings and profits for the current year. Included in that amount is $20 million of Subpart F income. Wellington has been a CFC for the entire year and makes no distributions in the current year. Wellington must include in gross income (before any § 78 gross-up) :

Nico lives in California. She was born in Peru but holds a green card. Nico is a nonresident alien (NRA).

Which of the following statements regarding income sourcing is correct?

The U.S. system for taxing income earned outside its borders by U.S. persons is referred to as the territorial approach, because only income earned within the U.S. border is subject to taxation.

Subpart F income includes portfolio income like dividends and interest.

Typically, sales/use taxes constitute about 20 percent of a state's annual tax collections.

Which of the following statements regarding the U.S. taxation of non-U.S. persons is true?

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

All of the U.S. states have adopted a tax based on the net taxable income of corporations.

Chipper Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z. Chipper's activities establish nexus for income tax purposes only in Z, the state of its incorporation. Chipper's sales, payroll, and property among the states include the following. ​ X utilizes a sales-only factor in its three-factor apportionment formula. How much of Chipper's taxable income is apportioned to X?

Ting, a regional sales manager, works from her office in State W. Her region includes several states, as indicated in the sales report below. Determine how much of Ting's $300,000 compensation is assigned to the payroll factor of State W.

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:

The throwback rule requires that: