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Exam 13: Multijurisdictional Taxation

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Question 21

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The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

A) True
B) False

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Question 22

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

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State Q taxable income is computed as fo...

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Question 23

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Typically,corporate income taxes constitute about 20 percent of a state's annual tax collections.

Which of the following determinations does not require knowing the amounts of one's U.S.- versus foreign-source income?

Bryden,a controlled foreign corporation owned 100% by USCo,earned $900,000 in Subpart F income for the current year.Bryden's current year E & P is $350,000,and its accumulated E & P is $15 million.What is the current year Subpart F deemed dividend to USCo?

The property factor includes land and buildings used for business purposes.

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice.In what areas might your Federal income tax knowledge also be applicable in your new assignment?

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.

A "U.S.shareholder" for purposes of CFC classification is any U.S.person who owns directly,indirectly,and constructively at least 50% of the voting power of a foreign corporation.

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:

Which of the following statements regarding a non-U.S.person's U.S.tax consequences is true?

Which of the following statements best describes the purpose of § 482,under which the Treasury can reallocate income and deductions among related taxpayers?

USCo,a U.S.corporation,purchases inventory from distributors within the U.S.and resells this inventory to customers outside the U.S.,with title passing outside the U.S.Profit on the sale is $10,000.What is the source of the USCo's inventory sales income?

Nonbusiness income receives tax-exempt treatment under all state corporate income taxes.

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

Dividends received from a domestic corporation are totally U.S.source:

If a state follows Federal income tax rules,the state's tax compliance and enforcement become easier to accomplish.

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.

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

Krebs,Inc.,a U.S.corporation,operates an unincorporated branch manufacturing operation in the U.K.Krebs,Inc.,reports $900,000 of taxable income from the U.K.branch on its U.S.tax return,along with $1,600,000 of taxable income from its U.S.operations.The U.K.branch income is all general limitation basket income.Krebs paid $270,000 in U.K.income taxes related to the $900,000 in branch income.Assuming a U.S.tax rate of 35%,what is Krebs' U.S.tax liability after any allowable foreign tax credits?