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4. What is the percentage excise tax that a disqualified person can be assessed on a prohibited transactionif that person fails to correct the transaction?a. 10%b. 15%c. 10% and 25%d. 25% and 200%e. 200%
Chapter 9: Taxation of Corporations 175. What type of organization is always a private foundation?Answers: Multiple ChoiceProblems1. The local garden club, an exempt organization, had gross unrelated business income during the year of$14,000. Its costs associated with this income were $8,900. What is its unrelated business income tax?2. An exempt organization has dividend income of $200,000. It receives contributions of $350,000 and grants totaling $175,000. Is this a private foundation?Answers: Problems
18 Taxation for Decision Makers Test BankAppendix 9-B: Multistate IssuesShort-answer Questions1.
What is the difference between a corporate franchise tax and a corporate income tax for state tax purposes?2. What are the three factors normally used to determine a state’s share of a corporation’s taxable income?3. What is meant by the term nexus?Answers: Short-answer Questions1.
A franchise tax is an excise tax based on the corporation’s right to do business or own property within a state. It is usually determined, however, based on the corporation’s taxable income in that state. The state income tax directly taxes the corporate income without the artificial designation as a franchise tax. In practice there is no difference—it is simply semantics.2. The three factors are normally sales, payroll, and property in each state as a percentage of the total of these factors for all states.3. Nexus is the connection that a business has with a particular state that is seeking to tax it. The corporation can establish nexus through owning property or having employees located within a state.Multiple Choice