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Exam 24: Multistate Corporate Taxation

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Question 101

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Discuss how a multistate business divides its corporate taxable income among the states in which it operates. Hint: use the terms allocation and apportionment in your comments.

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Generally, business income is apportione...

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Question 102

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A capital stock tax usually is structured as an excise tax imposed on a corporation's net worth, using financial statement data to compute the tax.

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Question 103

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Guilford Corporation is subject to franchise tax in State Z. The tax is imposed at a rate of 2.5% of the taxpayer's net worth that is apportioned to the state by use of a two-factor (sales and property equally weighted) formula. The property factor includes real and tangible personal property valued at net book value at the end of the taxable year. Of Guilford's sales, 60% are attributable to State Z, and $200,000 of the net book value of it's tangible personal property is located in State Z. Determine the State Z franchise tax payable by Guilford this year given the following end-of-the year balance sheet: $\begin{array}{lr}\text { Cash}&&\$100,000\\\text { Equipment}&\$800,000\\\text { Accumulated Depreciation}&(200,000) &600,000\\\text { Furniture and Fixtures}&\$150,000\\\text { Accumulated Depreciation}(50,000) &100,000\\\text { Intangible Assets}&&200,000\\\text { Total Assets}&&\$1,000,000\\\\\text { Accounts and Taxes Payable } && \$ 150,000 \\\text { Long-term Debt } && 300,000 \\\text { Common Stock } && 10,000 \\\text { Additional Paid-in Capital } && 600,000 \\\text { Retained Earnings } && \underline{(60,000) } \\\text { Total Liabilities and Equity } && \$ 1,000,000\end{array}$

Hopper Corporation's property holdings in State E are as follows: $\begin{array}{lc}\text { Item } & \begin{array}{l}\text { Property Factor } \\\text { Valuation (SM) }\end{array} \\\text { Manufacturing equipment } & 100 \\\text { Land held for potential appreciation } & 25 \\\text { Manufacturing equipment that is not currently needed and sits idle } & 15 \\\text { Manufacturing equipment that is not currently needed and is leased } & \\\text { to another taxpayer } & 20\end{array}$ Compute the numerator of Hopper's E property factor.