Question 1

If a corporation with a 21% marginal federal income tax rate pays $20,000 state income tax, the after-tax cost of the state tax is $15,800.

Accepted Answer

A) True 
 B)False

Question 2

Pennworth Corporation operates in the United States and foreign country M. Its domestic subsidiary Delco, Inc. operates in foreign country N. This year, the two corporations report the following.
Corporate tax rate schedule
If Pennworth and Delco file a consolidated U.S. tax return, compute consolidated income tax liability.

Accepted Answer

A)   $650,000
B)   $1,050,000
C)   $630,000
D)   $1,450,000E) B) and C)
F) A) and B)

Question 3

Multi-State, Inc. does business in two states. Its apportionment percentage in state A is 63%. Its apportionment percentage in the other state can be no more than 37%.

Accepted Answer

A) True 
 B)False

Question 4

According to Public Law 86-272, the sale of tangible goods to residents of a state is not sufficient to establish nexus in that state.

Accepted Answer

A) True 
 B)False

Question 5

For dividends received prior to 2018, the deemed paid foreign tax credit was available only to U.S. corporations that own 30% or more of the voting stock of a foreign corporation that paid dividends during the taxable year.

Accepted Answer

A) True 
 B)False

Question 6

Tri-State's, Inc. operates in Arkansas, Oklahoma, and Kansas. Assume that each state has adopted the UDITPA formula. During the corporation's tax year ended December 31, the apportionment data indicated:
-Tri-State's income for the current year is $250,000. Approximately how much will be taxed by Kansas?

Accepted Answer

A)   $83,000
B)   $95,000
C)   $32,000
D)   $170,000E) B) and C)
F) C) and D)

Question 7

The federal income tax deduction allowed for state income taxes paid decreases the cost of the state taxes.

Accepted Answer

A) True 
 B)False

Question 8

DFJ, a Missouri corporation, owns 55% of Duvall, a foreign corporation formed under Krunian law. Krunia is a central European country with a 22% corporate income tax and no income tax treaty with the United States. Last year, DFJ leased equipment to Duvall for a $415,000 annual rent payment. DFJ reported the rent as taxable income, while Duvall deducted it in the computation of taxable income. This year, the IRS determined that an arm's length rent for the equipment should be $600,000. The IRS can use its Section 482 authority to:

Accepted Answer

A)   Increase DFJ's taxable income by $185,000 and decrease Duvall's taxable income by $185,000.
B)   Increase DFJ's taxable income by $185,000.
C)   Require Duvall to pay $185,000 additional rent to DFJ.
D)   Require DFJ to recognize a $185,000 constructive dividend from Duvall.E) B) and D)
F) B) and C)

Question 9

Which of the following statements about income tax treaties is false?

Accepted Answer

A)   An income tax treaty is a bilateral agreement between the governments of two countries defining and limiting each country's respective tax jurisdiction.
B)   The provisions of income tax treaties pertain only to individuals and corporations that are residents of either treaty country.
C)   Under a typical treaty, the non-resident country would only tax a firm's profits if the firm maintained a permanent establishment in that country.
D)   Under a typical treaty, a firm's profits would be allocated to the countries in a manner similar to the apportionment of income among states under the UDITPA formula.E) A) and B)
F) B) and D)

Question 10

Lincoln Corporation, a U.S. corporation, owns 50% of the stock of a controlled foreign corporation (CFC) . At the beginning of the year, Lincoln's basis in its CFC stock was $100,000. The CFC's current year income was $1 million, $600,000 of which was subpart F income. The CFC paid no foreign income tax and distributed no dividends. 
-What is Lincoln's tax basis in its CFC stock at the end of the taxable year?

Accepted Answer

A)   $100,000
B)   $300,000
C)   $400,000
D)   $0E) A) and B)
F) All of the above

Exam 13: Jurisdictional Issues in Business Taxation

If a corporation with a 21% marginal federal income tax rate pays $20,000 state income tax, the after-tax cost of the state tax is $15,800.

Correct Answer
verified

According to Public Law 86-272, the sale of tangible goods to residents of a state is not sufficient to establish nexus in that state.

Correct Answer
verified

Multi-State, Inc. does business in two states. Its apportionment percentage in state A is 63%. Its apportionment percentage in the other state can be no more than 37%.

Correct Answer
verified

Which of the following statements about income tax treaties is false?

Correct Answer
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For dividends received prior to 2018, the deemed paid foreign tax credit was available only to U.S. corporations that own 30% or more of the voting stock of a foreign corporation that paid dividends during the taxable year.

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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The federal income tax deduction allowed for state income taxes paid decreases the cost of the state taxes.

Correct Answer
verified

Exam 13: Jurisdictional Issues in Business Taxation

If a corporation with a 21% marginal federal income tax rate pays $20,000 state income tax, the after-tax cost of the state tax is $15,800.

Correct AnswerverifiedShow Answer

According to Public Law 86-272, the sale of tangible goods to residents of a state is not sufficient to establish nexus in that state.

Correct AnswerverifiedShow Answer

Multi-State, Inc. does business in two states. Its apportionment percentage in state A is 63%. Its apportionment percentage in the other state can be no more than 37%.

Correct AnswerverifiedShow Answer

Which of the following statements about income tax treaties is false?

Correct AnswerverifiedShow Answer

For dividends received prior to 2018, the deemed paid foreign tax credit was available only to U.S. corporations that own 30% or more of the voting stock of a foreign corporation that paid dividends during the taxable year.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The federal income tax deduction allowed for state income taxes paid decreases the cost of the state taxes.

Correct AnswerverifiedShow 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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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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