Accounting Business Tax Strategy Discussion

Assignment Print View1.
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Award: 22..550
0 ppooiinnttss
Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and
purchases a $1,500 dress. Lisa returns to Virginia a few weeks later to pick up the dress and drive it back to her
Maryland residence where she will use the property. Assuming that Virginia’s sales tax rate is 5 percent and that
Maryland’s sales tax rate is 6 percent, what is Lisa’s sales and use tax liability?
2.
!
$0.
!
$75 to Virginia.
!
$75 sales tax to Virginia and $15 use tax to Maryland.
!
$90 to Maryland.
Award: 22..550
0 ppooiinnttss
Eagle, Incorporated, a New York corporation, runs ski tours in a several states. Eagle also has a New York retail
store and an Internet store which ships to out-of-state customers. The ski tours operate in Maine, New
Hampshire, and Vermont where Eagle has employees and owns and uses tangible personal property. Eagle has
real property only in New York. Eagle has the following sales:
State
Alaska
Colorado
Maine
New Hampshire
New York
Vermont
Totals
Eagle Sales
Goods
$ 23,194
10,612
35,913
26,721
65,431
41,982
Services
$
0
0
156,084
325,327
0
277,441
Total
$ 23,194
10,612
191,997
352,048
65,431
319,423
$203,853
$758,852
$962,705
Assume the following sales tax rates: Alaska (0 percent), Colorado (7.75 percent), Maine (8.5 percent), New
Hampshire (6.75 percent), New York (8 percent), and Vermont (5 percent). How much sales and use tax must
Eagle collect and remit in Vermont?
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!
$0
!
$3,053
6/27/19, 3:26 PM
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3.
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!
$2,099
!
$15,971
Award: 22..550
0 ppooiinnttss
Eagle, Incorporated, a New York corporation, runs ski tours in a several states. Eagle also has a New York retail
store and an Internet store which ships to out of state customers. The ski tours operate in Maine, New
Hampshire, and Vermont where Eagle has employees and owns and uses tangible personal property. Eagle has
real property only in New York. Eagle has nexus in Maine, New Hampshire, New York, and Vermont. Eagle has
the following sales:
State
Alaska
Colorado
Maine
New Hampshire
New York
Vermont
Eagle Sales
Goods
$ 23,194
10,612
35,913
26,721
65,431
41,982
Services
$
0
0
156,084
325,327
0
277,441
Total
$ 23,194
10,612
191,997
352,048
65,431
319,423
$203,853
$758,852
$962,705
Totals
Assume the following sales tax rates: Alaska (0 percent), Colorado (7.75 percent), Maine (8.5 percent), New
Hampshire (0 percent), New York (8 percent), and Vermont (5 percent). Assuming that Eagle has sales tax nexus
in all of the states under the recent Supreme Court ruling on Internet sales, how much total sales and use tax
must Eagle collect and remit?
4.
!
$10,386
!
$11,208
!
$26,733
!
$61,289
Award: 22..550
0 ppooiinnttss
Lefty provides demolition services in several southern states. Lefty has property as follows:
Property
State
Alabama
Kentucky
Mississippi
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Beginning
$ 123,032
$ 203,311
$ 881,921
Ending
$ 204,235
$ 185,102
$1,002,384
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Louisiana
Tennessee
$ 243,945
$ 143,198
$ 350,304
$ 143,198
Total
$1,595,407
$1,885,223
Lefty is a Mississippi Corporation. Lefty also rents property in Mississippi and Tennessee with annual rents of
$50,000 and $15,000, respectively. What is Lefty’s Mississippi property factor?
5.
!
59.4%
!
54.1%
!
62.7%
!
55.8%
Award: 22..550
0 ppooiinnttss
Carolina’s Hats has the following sales, payroll and property factors:
Sales
Payroll
Property
North Carolina
75.03%
68.62%
78.45%
South Carolina
22.51%
21.28%
14.56%
What is Carolina’s Hats North and South Carolina apportionment factors if both states use a double-weighted
sales factor formula?
6.
!
North Carolina 74.03 percent, and South Carolina 19.45 percent.
!
North Carolina 74.03 percent, and South Carolina 20.22 percent.
!
North Carolina 74.28 percent, and South Carolina 20.22 percent.
!
North Carolina 74.28 percent, and South Carolina 22.51 percent.
Award: 22..550
0 ppooiinnttss
Della Corporation is headquartered in Carlisle, Pennsylvania. Della has a Pennsylvania state income tax base of
$425,000. Of this amount, $75,000 was nonbusiness income. Della’s Pennsylvania apportionment factor is 28.52
percent. The nonbusiness income allocated to Pennsylvania was $60,000. Assuming a Pennsylvania corporate
tax rate of 8 percent, what is Della’s Pennsylvania state tax liability?
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7.
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!
$7,986
!
$9,084
!
$12,464
!
$12,786
Award: 22..550
0 ppooiinnttss
Rob provides transportation services in several western states. Rob has sales as follows:
SSttaattee
Arizona
California
Nevada
Washington
$
$
$
$
SSaalleess
350,512
1,134,589
849,142
323,032
$2,657,275
Total
Rob is a California Corporation and has income tax nexus in Arizona, California, Nevada, and Washington. What is
Rob’s Nevada sales factor?
8.
!
0%
!
42.70%
!
31.96%
!
74.84%
Award: 22..550
0 ppooiinnttss
Wendy produces cheese in Wisconsin. Wendy has sales as follows:
Wendy’s Sales:
State
Iowa
Michigan
Minnesota
Wisconsin
Sales
$ 849,142
$ 350,512
$ 134,589
$1,323,032
Totals
$2,657,275
Wendy is a Wisconsin Corporation and has income tax nexus in Iowa, Michigan, Minnesota, and Wisconsin. What
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are Wendy’s sales factors for Minnesota and Michigan?
9.
!
Minnesota 39.09% and Michigan 13.19%
!
Minnesota 13.19% and Michigan 5.06%
!
Minnesota 5.06% and Michigan 13.19%
!
Minnesota 31.96% and Michigan 13.19%
Award: 22..550
0 ppooiinnttss
PWD Incorporated is an Illinois corporation. It properly included, deducted, or excluded the following items on its
federal tax return in the current year:
Item
Illinois Income Taxes
Indiana Income Taxes
Ohio Commercial Activity Tax
Illinois Municipal Bond Interest
Indiana Municipal Bond Interest
Federal T-Note Interest
Amount
$ 33,333
$ 7,500
$ 4,000
$ 10,000
$ 15,000
$25,000
Federal Treatment
Deducted on federal return
Deducted on federal return
Deducted on federal return
Excluded from federal return
Excluded from federal return
Included on federal return
PWD’s Federal Taxable Income was $100,000. Calculate PWD’s Illinois state tax base.
10.
!
$116,000
!
$130,833
!
$131,000
!
$164,333
Award: 55..0
00
0 ppooiinnttss
Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows:
State
DC
Georgia
Virginia
Other
Totals
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Tennis Pro’s Property:
Beginning
$ 43,021
$ 92,385
$1,331,919
$ 68,203
Ending
$ 41,983
$ 83,024
$1,438,439
$ 68,203
$1,535,528
$1,631,649
6/27/19, 3:26 PM
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Tennis Pro also rents Virginia property at an annual rent of $24,000. What is Tennis Pro’s Virginia property
numerator and property factor?
Property numerator
Property factor (round to 2 decimal places)
11.
Award: 55..0
00
0 ppooiinnttss
Tennis Pro is headquartered in Virginia. Assume it has a Kentucky state income tax base of $220,000. Of this
amount, $40,000 was non-business income. Assume that Tennis Pro’s Kentucky sales, payroll and property
apportionment factor are 12, 5, and 3 percent, respectively. Assume that Kentucky uses a single-factor sales
formula apportionment method. The non-business income allocated to Kentucky was $1,000. Assuming
Kentucky’s corporate tax rate of 6 percent, what is Tennis Pro’s Kentucky state tax liability?
Kentucky state tax
12.
Award: 22..550
0 ppooiinnttss
Saginaw Steel Corporation has a precredit U.S. tax of $105,000 on $500,000 of taxable income in 2018. Saginaw
has $200,000 of foreign source taxable income and paid $24,000 of income taxes to the German government
on this income. All of the foreign source income is treated as foreign branch income for foreign tax credit
purposes. Saginaw’s foreign tax credit on its 2018 tax return will be:
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!
$105,000
!
$60,000
!
$42,000
!
$24,000
6/27/19, 3:26 PM
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Award: 22..550
0 ppooiinnttss
Ames Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income in 2018. Ames has
$600,000 of foreign source taxable income and paid $130,000 of income taxes to the U.K. government on this
income. All of the foreign source income is treated as foreign branch income for foreign tax credit purposes.
Ames’s foreign tax credit on its 2018 tax return will be:
rev: 08_21_2018_QC_CS-134105
14.
!
$210,000
!
$126,000
!
$120,000
!
$130,000
Award: 22..550
0 ppooiinnttss
Austin Corporation, a U.S. corporation, received the following investment income during 2018: $50,000 capital
gain from sale of stock in a French corporation, $20,000 interest on a loan to its Dutch subsidiary, $40,000
royalty from its 50-percent owned Irish venture, and $30,000 dividend income from stock in a Brazilian
corporation. How much foreign source income does Austin have in 2018?
15.
!
$140,000
!
$110,000
!
$90,000
!
$60,000
Award: 22..550
0 ppooiinnttss
Orono Corporation manufactured inventory in the United States and sold the inventory to customers in Canada.
Gross profit from the sale of the inventory was $300,000, and the gross profit rate is 40%. Title to the inventory
passed FOB: destination. How much of the gross profit is treated as U.S. source income for purposes of
computing the corporation’s foreign tax credit in the current year?
!
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$300,000
6/27/19, 3:26 PM
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!
$150,000
!
$0
!
$120,000
Award: 22..550
0 ppooiinnttss
Manchester Corporation, a U.S. corporation, incurred $100,000 of interest expense during 2018. Manchester
manufactures inventory that is sold within the United States and abroad. The total tax book value of its U.S.
production assets is $15,000,000. The total tax book value of its foreign production assets is $5,000,000. What
amount of interest expense is apportioned to the company’s foreign source income for foreign tax credit
purposes, assuming this is the first year the company makes this computation and the interest expense is fully
deductible in 2018?
17.
!
$0
!
$20,000
!
$25,000
!
$100,000
Award: 22..550
0 ppooiinnttss
Bismarck Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income in 2018. Bismarck
has $200,000 of foreign source taxable income characterized as foreign branch income and $50,000 of foreign
source taxable income characterized as passive category income. Bismarck paid $40,000 of foreign income
taxes on the foreign branch income and $10,000 of foreign income taxes on the passive category income. What
amount of foreign tax credit (FTC) can Bismarck use on its 2018 U.S. tax return and what is the amount of the
carryforward, if any?
18.
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!
$50,000 FTC with $0 carryforward
!
$52,000 FTC with $0 carryforward
!
$52,000 FTC with $38,000 carryforward
!
$50,000 FTC with $2,000 carryforward
Award: 22..550
0 ppooiinnttss
6/27/19, 3:26 PM
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Pierre Corporation has a precredit U.S. tax of $315,000 on $1,500,000 of taxable income in 2018. Pierre has
$300,000 of foreign source taxable income characterized as foreign branch income and $150,000 of foreign
source taxable income characterized as passive category income. Pierre paid $65,000 of foreign income taxes
on the foreign branch income and $15,000 of foreign income taxes on the passive category income. What
amount of foreign tax credit (FTC) can Pierre use on its 2018 U.S. tax return and what is the amount of the
carryforward, if any?
19.
!
$315,000 FTC with $0 carryforward
!
$75,000 FTC with $0 carryforward
!
$78,000 FTC with $2,000 carryforward
!
$80,000 FTC with $0 carryforward
Award: 22..550
0 ppooiinnttss
Boca Corporation, a U.S. corporation, reported U.S. taxable income of $1,000,000 in 2018. Boca also received a
dividend of $100,000 from the corporation’s 100 percent owned subsidiary in Italy. The Italian government
imposed a withholding tax of $5,000 on the dividend. Compute Boca Corporation’s foreign tax credit for 2018.
20.
!
$0
!
$5,000
!
$21,000
!
$100,000
Award: 22..550
0 ppooiinnttss
Boomerang Corporation, a New Zealand corporation, is owned by the following unrelated persons: 40 percent by
a U.S. corporation, 5 percent by a U.S. individual, and 55 percent by an Australian corporation. During the year,
Boomerang earned $3,000,000 of subpart F income. Which of the following statements is true about the
application of subpart F to the income earned by Boomerang?
!
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Boomerang is a CFC and the U.S. corporation and U.S. individual will have a deemed
dividend of $1,200,000 and $150,000, respectively.
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21.
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!
Boomerang is a CFC and only the U.S. corporation will have a deemed dividend of
$1,200,000.
!
Boomerang is a CFC and the U.S. corporation, U.S. individual, and Australian
corporation will have a deemed dividend of $1,200,000, $150,000, and $1,650,000,
respectively.
!
Boomerang is not a CFC and none of the shareholders will have a deemed dividend
under subpart F.
Award: 55..0
00
0 ppooiinnttss
Appleton Corporation, a U.S. corporation, reported total taxable income of $10,000,000 in 2018. Taxable
income included $2,500,000 of foreign source taxable income from the company’s branch operations in the
United Kingdom. All of the branch income is foreign branch income. Appleton paid U.K. income taxes of
$500,000 on its branch income. Compute Appleton’s net U.S. tax liability and any foreign tax credit carryover for
2018.
Net U.S. tax liability after FTC
FTC carryover
22.
Award: 55..0
00
0 ppooiinnttss
Ypsi Corporation has a precredit U.S. tax of $420,000 on $2,000,000 of taxable income in 2018. Ypsi has
$400,000 of foreign source taxable income characterized as foreign branch income and $150,000 of foreign
source taxable income characterized as passive category income. Ypsi paid $80,000 of foreign income taxes on
the foreign branch income and $45,000 of foreign income taxes on the passive category income. What amount
of foreign tax credit (FTC) can Ypsi use on its 2018 U.S. tax return and what is the amount of the FTC
carryforward, if any?
Foreign tax credit for 2018
FTC carryforward
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In 2018 Brent gave a gift of $25,000 to his brother and a gift of $15,000 to his sister. Brent’s taxable gifts for 2018
are
24.
!
Brent made taxable gifts of $40,000.
!
Brent made taxable gifts of $25,000.
!
Brent made taxable gifts of $10,000.
!
Brent made taxable gifts of $0.
Award: 22..550
0 ppooiinnttss
In 2018 Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha
gave each of her three nephews Christmas gifts of an additional $5,000 in cash. What is the amount of the
taxable gifts, if any, made by Samantha in 2018?
25.
!
$3,000.
!
$30,000.
!
$45,000.
!
$0.
Award: 22..550
0 ppooiinnttss
Matthew and Addison are married and live in Michigan, a common-law state. In 2018 Addison gave cash gifts of
$40,000 to each of her two sons, and Matthew gave $20,000 to his daughter. What is the amount of Matthew’s
taxable gifts if Matthew and Addison opt to gift split?
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!
$0
!
$5,000.
!
$15,000.
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!
26.
$10,000.
Award: 22..550
0 ppooiinnttss
Andrew and Brianna are married and live in Texas, a community property state. For their birthdays this year
Andrew gave cash gifts of $34,000 to each of his two daughters, and Brianna gave $20,000 to her niece. What
is the amount of Brianna’s taxable gifts for 2018?
27.
!
$2,000.
!
$4,000.
!
$5,000.
!
$0.
Award: 22..550
0 ppooiinnttss
At his death Trevor had a probate estate consisting of $4 million of property. Which of the following is a true
statement about Trevor’s estate or estate tax?
28.
!
Trevor must have a taxable estate of at least $4 million.
!
Trevor’s adjusted gross estate can be less than $4 million.
!
Trevor must have an estate tax base (cumulative taxable transfers) of at least $4
million.
!
Trevor’s gross estate can be less than $4 million.
Award: 22..550
0 ppooiinnttss
At her death Emily owned real estate worth $2.3 million and other property worth $10 million. Property taxes of
$200,000 were accrued on the real estate at the time of Emily’s death. Which of the following is a true statement
with respect to these items without considering any other owned property?
!
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Emily’s gross estate is $12.3 million.
6/27/19, 3:26 PM
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29.
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!
Emily’s taxable estate is $12.5 million.
!
Emily’s adjusted gross estate is $12.3 million.
!
Emily’s estate tax base is $12.5 million.
Award: 22..550
0 ppooiinnttss
The executor of Isabella’s estate incurred administration expenses of $32,000 and paid $5,000 in funeral
expenses. The executor charged the estate for $19,000 in fees. What is the maximum amount Isabella’s estate
can deduct in computing the adjusted gross estate?
30.
!
$32,000.
!
$37,000.
!
$56,000.
!
$61,000.
Award: 22..550
0 ppooiinnttss
Chloe’s gross estate consists of the following property valued at the date of death:
Description
Real estate
Cash, stock, and bonds
Personal property
Value
$5,500,000
6,700,000
300,000
Chloe’s real estate is encumbered by a mortgage of $450,000, and Chloe’s executor paid her funeral costs of
$6,000 and charged fees for $24,000. Which of the following is a true statement?
31.
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!
Chloe’s adjusted gross estate is at least $12,500,000.
!
Chloe’s taxable estate is at least $12,020,000.
!
Chloe’s taxable estate is $12,050,000.
!
Chloe’s gross estate is at least $12,500,000.
Award: 22..550
0 ppooiinnttss
6/27/19, 3:26 PM
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For the holidays, Samuel gave a necklace worth $35,000 to Jennifer and jewelry worth $44,000 to Savannah.
Samuel is married to Wendy and they live in a common-law state. Samuel made taxable gifts of
32.
!
$9,500
!
$19,000
!
$49,000
!
$0
Award: 22..550
0 ppooiinnttss
Isaac is married and Isaac and his spouse agree that they want to transfer the maximum amount of cash to each
of their two children and three grandchildren. How much cash in total can Isaac and his spouse transfer to his
children and grandchildren each year without creating any taxable gifts?
33.
!
$30,000
!
$300,000
!
$150,000
!
$15,000
Award: 55..0
00
0 ppooiinnttss
At his death in 2018, Nathan owned the following property:
Description
Real estate
Cash, stock, and bonds
Personal property
Value
$ 5,000,000
10,500,000
200,000
The real estate is subject to a $700,000 mortgage. Nathan made taxable gifts in 2009 totaling $2 million, at
which time he used his exemption equivalent of $1 million in 2009. Nathan has never been married. What is
the amount of his estate tax due?
Estate tax due
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Award: 55..0
00
0 ppooiinnttss
Gabriel had a taxable estate of $12 million when he died in 2018. Calculate the amount of estate tax due (if any)
if Gabriel made prior taxable gifts in 2005 totaling $1 million at which time he claimed an applicable credit of $1
million and paid no tax. Gabriel was unmarried at his death.
Estate tax due
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