State income tax quiz 1

Which lines from Federal Form 1120 do states generally use as the starting point for determining income subject to apportionment (select all that apply)?

a) Line 11, Total income c) Line 30, Taxable income

Which types of receipts are typically included in a state's sales factor numerator?

a) Receipts from sales where the purchaser picks up the goods at an out-of-state location and brings them in-state for use

Which combination of sales factor sourcing rules generally most benefits profitable in-state companies?

a) Single sales factor / market based sourcing

Which are common state income tax modifications (select all that apply)?

a) State taxes based on income b) Dividend received deduction d) Depreciation

The taxpayer must exclude from the sales factor denominator sales made in any states the taxpayer is not taxable. This is a:

a) Throwout rule

Which of the following are unitary factors expressed in Mobil and Exxon (select all that apply)?

a) Vertical integration b) Functional integration c) Geographic proximity d) Centralized management

Which of the following questions pertain to the unitary business principal (select all that apply)?

a) Which entities are included in a combined report? b) Which entities have established corporate income tax nexus in the state? c) Which entities' income is included in the tax base? d) Which entities' factors are considered in calculating apportionment?

Which of the following thresholds are employed by the states to establish unity of ownership between corporations (select all that apply)?

a) > 51 % b) > 80% c) > 50 % d) 80% or greater

Which of the following tests for unity are employed by states?

a) Contribution and dependency b) Three unities

Under the sourcing hierarchy, payroll should first be sourced to the state in which the employee's services are wholly or substantially performed, if services performed outside of that state are incidental.

True

What is a key difference between allocable and apportionable income?

b) Apportionable income is attributed to a particular state through the use of a formula

For what primary reason do states generally disconnect from Federal income tax rules in determining the tax base subject to apportionment?

b) Budgetary concerns

Payroll paid to an employee in a "no nexus"/Public Law 86-272 state is:

b) Included in the denominator

Which of the following is least likely to be considered business income, from a transactional test perspective?

b) Income a baker earns from selling his oven

Which of the following is true with regard to the property factor?

b) Leased property may be included in both a lessor and lessee's property factors as owned property and as rental expense x 8, respectively

From which court decision is this quote: "The linchpin of apportionability in the field of state taxation is the unitary business principle."

b) Mobil Oil Corp.

How did the Oregon courts interpret the Income Producing Activity in the AT&T case?

b) Narrowly, at the transactional level

States which employ market sourcing rules for sales of other than tangible personal property generally allow the taxpayer to use a reasonable approximation:

b) When the state's delineated rules for determining the taxpayer's market cannot be applied

Worldwide combined reporting was upheld by the U.S. Supreme Court in which of these cases?

c) Container Corp.

Which state does NOT conform to the I.R.C. 381 net operating loss carryover provisions?

c) New Jersey

A plurality of states weight the sales factor in the apportionment formula by:

d) 100%

Which of the following questions does NOT relate to the unitary business principle?

d) Does a subsidiary use a different apportionment formula than its parent (e.g., transportation company or financial organization)?

Today, most combined states which have a throwback provision specifically employ this rule which typically results in including more sales in the numerator of the sales factor.

d) Finnigan rule

Which combination of sales factor sourcing Cost of Performance rules generally results in market based sourcing?

d) Income Producing Activity narrowly defined / limited inclusion of costs

What is a key difference between operational vs. investment income?

d) Operational income is business income (apportionable), whereas investment income is nonbusiness income (non-apportionable/allocable)