Question 1

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 $400,000$800,000$300,000$1,500,000 Payroll 100,000150,00050,000300,000 Property 200,000200,000200,000600,000\begin{array} { l r r r r } & 	ext { State A } & 	ext { State B } & 	ext { State C } & 	ext { Totals } \	ext { Sales } & \$ 400,000 & \$ 800,000 & \$ 300,000 & \$ 1,500,000 \	ext { Payroll } & 100,000 & 150,000 & 50,000 & 300,000 \	ext { Property } & 200,000 & 200,000 & 200,000 & 600,000\end{array} Sales  Payroll  Property ​ State A $400,000100,000200,000​ State B $800,000150,000200,000​ State C $300,00050,000200,000​ Totals $1,500,000300,000600,000​  ?
Helene's apportionable income assigned to A is:

Accepted Answer

A)  $0.
B)  $266,667.
C)  $311,100.
D)  $1,000,000. E) A) and D)
F) All of the above

Question 2

The property factor includes business assets that the taxpayer owns, but also those merely used under a lease agreement.

Accepted Answer

A) True 
 B)False

Question 3

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 $600,000 Compensation paid to independent contractors 300,000 Compensation paid to managers of nonbusiness rental property 100,000 Total compensation $1,000,000\begin{array}{lr}	ext { Compensation of sales force } & \$ 600,000 \	ext { Compensation paid to independent contractors } & 300,000 \	ext { Compensation paid to managers of nonbusiness rental property } & 100,000 \	ext { Total compensation } & \$ 1,000,000\end{array} Compensation of sales force  Compensation paid to independent contractors  Compensation paid to managers of nonbusiness rental property  Total compensation ​$600,000300,000100,000$1,000,000​

Accepted Answer

A)  $1,000,000
B)  $900,000
C)  $700,000
D)  $600,000 E) A) and B)
F) C) and D)

Question 4

José Corporation realized $900,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales, payroll, and property among the states include the following.   StateX  State Z  Totals  Sales $1,500,000$1,000,000$2,500,000 Property 500,000−0−500,000 Payroll 2,000,000−0−2,000,000\begin{array} { l r r r } & 	ext { StateX } & 	ext { State Z } & 	ext { Totals } \	ext { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \	ext { Property } & 500,000 & - 0 - & 500,000 \	ext { Payroll } & 2,000,000 & - 0 - & 2,000,000\end{array} Sales  Property  Payroll ​ StateX $1,500,000500,0002,000,000​ State Z $1,000,000−0−−0−​ Totals $2,500,000500,0002,000,000​  ? Z utilizes a double-weighted sales factor in its three-factor apportionment formula.How much of José's taxable income is apportioned to Z?

Accepted Answer

A)  $1,000,000
B)  $900,000
C)  $180,000
D)  $0 E) B) and C)
F) None of the above

Question 5

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

Accepted Answer

A)  Jen, Kathy, Leslie, David, Ben, and Mike are all U.S.citizens.
B)  Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.David is married to Kathy.Mike is a foreign resident and citizen.
C)  Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.Ben is Mike's son.Mike is a foreign resident and citizen.
D)  Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.Mike is a foreign resident and citizen.E) A) and B)
F) A) and D)

Question 6

A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

Accepted Answer

A) True 
 B)False

Question 7

U.S.income tax treaties typically:

Accepted Answer

A)  Provide for taxation exclusively by the source country.
B)  Provide for taxation exclusively by the country of residence.
C)  Provide rules by which multinational taxpayers avoid double taxation.
D)  Provide that the country with the highest tax rate will be allowed exclusive tax collection rights.E) B) and C)
F) A) and C)

Question 8

The model law relating to the assignment of income among the states for corporations is:

Accepted Answer

A)  Public Law 86-272.
B)  The Multistate Tax Treaty.
C)  The Multistate Tax Commission (MT
C)  .
D)  The Uniform Division of Income for Tax Purposes Act (UDITP
A)  .E) None of the above
F) B) and C)

Question 9

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:

Accepted Answer

A)  $0.
B)  $200,000.
C)  $800,000.
D)  $1,000,000.E) C) and D)
F) None of the above

Question 10

Flint Corporation is subject to a corporate income tax only in State X.The starting point in computing X taxable income is Federal taxable income.Flint's Federal taxable income is $750,000, which includes a $50,000 deduction for state income taxes.During the year, Flint received $10,000 interest on Federal obligations.X tax law does not allow a deduction for state income tax payments. ​
Flint's taxable income for X purposes is:

Accepted Answer

A)  $810,000.
B)  $800,000.
C)  $790,000.
D)  $750,000.E) All of the above
F) B) and D)

Question 11

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S.parent, followed by:

Accepted Answer

A)  Sale to anyone outside Fredonia.
B)  Sale to anyone inside Fredonia.
C)  Sale to a related party outside Fredonia.
D)  Sale to a non-related party outside Fredonia.E) A) and B)
F) None of the above

Question 12

Which of the following statements is false in regard to the U.S.income tax treaty program?

Accepted Answer

A)  There are about 70 bilateral income tax treaties between the U.S.and other countries.
B)  Tax treaties generally provide for primary taxing rights that require the other treaty partner to allow a credit for the taxes paid on the twice-taxed income.
C)  U.S.income tax treaties are written to set up a "network" of up to five foreign countries that are covered by the treaty language.
D)  None of the above statements is false.E) A) and B)
F) A) and D)

Question 13

A typical state taxable income addition modification is for the state's NOL allowed the taxpayer for the tax year.

Accepted Answer

A) True 
 B)False

Question 14

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.?

Accepted Answer

A)  Because the inventory is manufactured in the U.S., all of the inventory income is U.S.source.
B)  If title passes on the inventory outside the U.S., all of the inventory income is foreign source.
C)  The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on where the sale negotiation takes place.
D)  The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on location of production assets.E) A) and D)
F) B) and C)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

What is the significance of the term nexus when discussing state income taxation?

Accepted Answer

A U.S.state cannot levy an income tax on...

Question 18

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. $$\begin{array} { l l r } 
\text { Customer } & \text { Customer's Location } & \text { This Year's Sales } \
\text { NorCo } & \mathrm { E } & \$ 60,000,000 \
\text { Tools, Inc. } & \mathrm { F } & 20,000,000 \
\text { UniBell } & \mathrm { G } & 50,000,000 \
\text { U.S. Department of Defense } & \text { All } 50 \text { U.S. States } & 20,000,000 \
\text { Total } & & \$ 150,000,000
\end{array}$$

Accepted Answer

Because F has not adopted a throwback ru...

Question 19

José Corporation realized $900,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales, payroll, and property among the states include the following.   StateX  State Z  Totals  Sales $1,500,000$1,000,000$2,500,000 Property 500,000−0−500,000 Payroll 2,000,000−0−2,000,000\begin{array} { l r r r } & 	ext { StateX } & 	ext { State Z } & 	ext { Totals } \	ext { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \	ext { Property } & 500,000 & - 0 - & 500,000 \	ext { Payroll } & 2,000,000 & - 0 - & 2,000,000\end{array} Sales  Property  Payroll ​ StateX $1,500,000500,0002,000,000​ State Z $1,000,000−0−−0−​ Totals $2,500,000500,0002,000,000​  ? X utilizes an equally weighted three-factor apportionment formula.How much of José's taxable income is apportioned to X?

Accepted Answer

A)  $120,000
B)  $450,000
C)  $780,000
D)  $900,000 E) All of the above
F) A) and D)

Question 20

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. $$\begin{array} { l r r } 
& \text { State A } & \text { State B } \
\text { Gross sales to purchasers in state } & \$ 420,000 & \$ 360,000 \
\text { Sales returns } & 9,000 & 11,000 \
\text { Discounts allowed } & 21,000 & 31,000 \
\text { Rental income } & 60,000 * & 25,000 * *
\end{array}$$ ​
* Excess warehouse space, seasonal rental to a competitor.
** Land held for speculation.

Accepted Answer

* Excess warehouse space...

Exam 16: Multi-Juris-Dictional Taxation

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S.parent, followed by:

Correct Answer
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Correct Answer
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Because F has not adopted a throwback ru...
View Answer

The model law relating to the assignment of income among the states for corporations is:

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

Correct Answer
verified

Correct Answer
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* Excess warehouse space...
View Answer

Correct Answer
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U.S.income tax treaties typically:

Correct Answer
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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:

Correct Answer
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The property factor includes business assets that the taxpayer owns, but also those merely used under a lease agreement.

Correct Answer
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Correct Answer
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A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

Correct Answer
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Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Correct Answer
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A typical state taxable income addition modification is for the state's NOL allowed the taxpayer for the tax year.

Correct Answer
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Correct Answer
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Which of the following statements is false in regard to the U.S.income tax treaty program?

Correct Answer
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What is the significance of the term nexus when discussing state income taxation?

Correct Answer
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A U.S.state cannot levy an income tax on...
View Answer

Correct Answer
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Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.?

Correct Answer
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In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

Correct Answer
verified

Exam 16: Multi-Juris-Dictional Taxation

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S.parent, followed by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedBecause F has not adopted a throwback ru...View AnswerShow Answer

The model law relating to the assignment of income among the states for corporations is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverified​ ​* Excess warehouse space...View AnswerShow Answer

Correct AnswerverifiedShow Answer

U.S.income tax treaties typically:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

The property factor includes business assets that the taxpayer owns, but also those merely used under a lease agreement.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

Correct AnswerverifiedShow Answer

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Correct AnswerverifiedShow Answer

A typical state taxable income addition modification is for the state's NOL allowed the taxpayer for the tax year.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is false in regard to the U.S.income tax treaty program?

Correct AnswerverifiedShow Answer

What is the significance of the term nexus when discussing state income taxation?

Correct AnswerverifiedA U.S.state cannot levy an income tax on...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.?

Correct AnswerverifiedShow Answer

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Because F has not adopted a throwback ru...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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* Excess warehouse space...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A U.S.state cannot levy an income tax on...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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