CHAPTER24REVIEWQUESTIONS - CHAPTER 24 MULTISTATE CORPORATE...

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Unformatted text preview: CHAPTER 24 MULTISTATE CORPORATE TAXATION TRUE/FALSE 1. Roughly two-thirds of all taxes paid by businesses in the U.S. are to state, local, and municipal jurisdictions. ANS: F About forty percent of all business taxes are paid to state and local agencies. PTS: 1 REF: p. 24-2 2. Usually a business chooses a location where it will build a new plant based chiefly on tax considerations. ANS: F Nontax considerations usually prevail. PTS: 1 REF: p. 24-2 3. Politicians use tax devices to create economic development incentives. ANS: T REF: p. 24-3 4. A few states have not adopted a tax based on net taxable income. ANS: T REF: p. 24-3 5. Only a few states have adopted an alternative minimum tax system. ANS: T REF: p. 24-3 6. Some states enforce their tax laws more aggressively than do others. ANS: T REF: p. 24-3 7. In some states, the “business privilege” tax is based on net taxable income. ANS: T REF: p. 24-3 24-1 24-2 2008 Comprehensive Volume/Test Bank 8. Most businesses can use the Federal tax year end for the state income tax. ANS: T REF: p. 24-4 9. A few states have delegated the collection of their income taxes to the IRS. ANS: F No state has done this, although legislation allowing full piggybacking already exists. PTS: 1 REF: p. 24-4 10. Most states begin the computation of taxable income with an amount from the Federal income tax return. ANS: T REF: p. 24-5 11. If a state follows Federal income tax rules, compliance and enforcement become easier to accomplish. ANS: T REF: p. 24-5 12. A typical state taxable income addition modification is the interest income earned on bonds issued by another state. ANS: T REF: Exhibit 24-1 13. A typical state taxable income addition modification is the income tax paid to the state for the year. ANS: T REF: Exhibit 24-1 14. A state cannot levy a tax on a business unless the business was incorporated in the state. ANS: F Nexus is the threshold authorizing the state to levy a tax. PTS: 1 REF: p. 24-8 15. Typical indicators of nexus include the presence of employees based in the state, and the ownership or lease of realty there. ANS: T REF: p. 24-8 16. Under P.L. 86-272, the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of inventory in the state. ANS: T REF: p. 24-8 17. In most states, a taxpayer’s income is apportioned on the basis of a formula measuring the extent of business contact, and allocated according to the location of property owned or used. ANS: T REF: p. 24-9 Multistate Corporate Taxation 24-3 18. States use the same apportionment factors and formula. ANS: F Each state chooses and defines its own factors. PTS: 1 REF: p. 24-11 19. Nonbusiness income includes rentals of investment property....
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This note was uploaded on 06/11/2008 for the course ACCT 4153 taught by Professor Campbell during the Fall '08 term at The University of Texas at San Antonio- San Antonio.

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CHAPTER24REVIEWQUESTIONS - CHAPTER 24 MULTISTATE CORPORATE...

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