CHAPTER 24 MULTISTATE CORPORATE TAXATION

1. The starting point in computing state taxable income generally is .

2. In determining taxable income for state income tax purposes, interest income from Federal bonds typically constitutes a(n) modification.

3. In determining taxable income for state income tax purposes, interest income from another state’s bonds typically

constitutes a(n) modification.

4. describe(s) the degree of business activity that must be present before a taxing

jurisdiction has the right to impose a tax on an out­of­state entity’s income.

5. Under Public Law 86-272, a state is prohibited from taxing a business if the only connection with the state is the

of orders for sales of tangible personal property that are sent outside the state for approval or rejection.

6. P.L. 86-272 (does/does not) create nexus when the sales representative approves a

sale at the customer’s location.

7. P.L. 86-272 (does/does not) create nexus when the seller inserts advertising flyers into the Sunday newspaper that is sold in the state.

8. Apportionment is a means by which a corporation’s income is divided among the

states in which it conducts business.

9. Allocation is a method under which a corporation’s income is directly assigned to

the specific states where the income is derived.

10.Although apportionment formulas vary among jurisdictions, most states use the same three factors in the formula. The factors are ____________________, ____________________, and ____________________.

11.In the apportionment formula, most states assign more than a one-third weight to the
factor.

12.State Q has adopted sales-factor-only apportionment for its corporate income tax. As a result, a

(larger/smaller) percentage of an out­of­state corporation’s income is assigned to
tax in the state.

13.Under the UDITPA’s concept, sales are assumed to take place at the point of delivery,

as opposed to the location at which the shipment originates.

14. When a is in effect, out-of-state sales that are not subject to tax in the destination state are pulled back into the sales factor numerator of the origination state.