chapter_16_solutions - 16-1 Chapter 16 Solutions MultiState...

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16-1 Chapter 16 Solutions MultiState Corporate Taxation (2011 edition) updated: November 17, 2010 25. The Streamlined Sales Tax Project (SSTP) is an effort by state/local tax administrators to unify the definition of items that are subject to the sales/use tax. The Multistate Tax Commission helped to develop a common set of definitions for state legislatures to adopt, so that enforcement of the sales/use taxes would be improved, especially with respect to cross-border sales. The SSTP does not force the states to adopt common tax rates or enforcement procedures, but it includes checklists as to which types of food, clothing, and computing items might be identified as taxable. Tax in the News on p. 16-29 34. a. A. $10,000. Assumes own state taxes are NOT tax deductible. b. A. $10,000. Assumes all state taxes are NOT tax deductible. c. N. In most states. d. S. $3,000. Assumes the refund was included in gross income under the “tax benefit” rule. e. N. Most local taxes are also deductible at the state level. f. S. $5,000. Subtract excess state tax depreciation. g. A. $5,000. Add back excess Federal tax depreciation. h. S. $3,000. Federal gain $9,000 gain vs. state gain $6,000. i. N. State credit would come out later. j. Answer varies substantially among the states; however, in most states the answer is no modification. Exhibit 16.1 35. Perk’s state taxable income is determined as follows. Federal taxable income $200,000 A income tax expense +10,000 A income tax refund – 3,000 Depreciation modification ($300,000 – $120,000) +180,000 A taxable income $387,000 Exhibit 16.1 and Example 1
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16-2 36. a. Sales $4,000,000 Cost of sales –3,250,000 Cost recovery (Federal) –400,000 Interest income (Federal) +50,000 X income tax expense –250,000 Federal taxable income $ 150,000 b. If interest generated from X obligations is exempt from state tax, state taxable income is $450,000. Federal taxable income $150,000 State income tax expense +250,000 Depreciation modification ($400,000 – $300,000) +100,000 Interest on Federal obligations – 50,000 X taxable income $450,000 c. If interest generated from X obligations is subject to state income tax, state taxable income is $515,000. Federal taxable income $150,000 State income tax expense +250,000 Depreciation modification ($400,000 – $300,000) +100,000 Interest on Federal obligations –50,000 Interest on X obligations +75,000 Expenses related to X obligations –10,000 X taxable income $515,000 Exhibit 16.1 and Examples 1 and 2 37. STATE D TAXABLE INCOME Income subject to apportionment (business income) $2,000,000 Apportionment formula Sales $4,500,000/$10,000,000 = 45.00% Property $600,000/$2,100,000 = 28.57% Payroll $1,200,000/$3,000,000 = 40.00% Total 113.57% State D apportionment factor (113.57%/3) × 37.86% Taxable income apportioned to D $ 757,200 Plus: Income allocated to D –0–* D taxable income $ 757,200 *Since the property for which the $500,000 gain was derived was located in E, such income is not allocated to D.
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This note was uploaded on 09/09/2011 for the course TAX 5015 taught by Professor Kelliher,c during the Spring '08 term at University of Central Florida.

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chapter_16_solutions - 16-1 Chapter 16 Solutions MultiState...

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