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Exam 16: Multijurisdictional Taxation

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Question 41

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Kipp, a U.S.shareholder under the CFC provisions, owns 40% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000, Kipp is taxed on receipt of a constructive dividend of $80,000.

A) True
B) False

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Question 42

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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:

A) $0.
B) $200,000.
C) $800,000.
D) $1,000,000.

E) B) and C)
F) C) and D)

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Question 43

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The U.S.system for taxing income earned inside its borders by non-U.S.persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Goolsbee, Inc., a U.S.corporation, generates U.S.-source and foreign-source gross income.Goolsbee's assets tax basis) are as follows. Goolsbee incurs interest expense of $200,000.Apportion interest expense to foreign-source income.

Which of the following statements regarding the taxation of U.S.real property gains recognized by non-U.S.persons not engaged in a U.S.trade or business is false? Gains from the disposition of U.S.real property are:

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?

Match each of the following items with the appropriate description, in applying the P.L.86-272 definition of solicitation. -Purchasing ads that show up on search-result screens for internet browsers.

In computing the property factor, property owned by the corporation typically is valued at its , but without adjusting for depreciation.

Match each of the following terms with the appropriate description, in the state income tax formula.Apply the UDITPA rules in your responses. -Federal general business credit.

Match each of the following items with the appropriate description, in applying the P.L.86-272 definition of solicitation. -Checking the customer's inventory to determine whether a reorder is needed.

U.S.income tax treaties:

In applying the typical apportionment formula:

Zhao Company sold an asset on the first day of the tax year for $500,000.Zhao'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 $350,000.What adjustment, if any, should be made to Zhao's Federal taxable income in determining the correct taxable income for the typical state?

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

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

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

When the taxpayer operates in one or more unitary states:

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.

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.

Income tax treaties provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.