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south western federal taxation

Questions and Answers of South Western Federal Taxation

Indicate whether each of the following items should be allocated or apportioned by the taxpayer in computing state corporate taxable income. Assume that the state follows the general rules of
Dread Corporation operates in a high-tax state. The firm asks you for advice on a plan to outsource administrative work done in its home state to independent contractors. This work now costs the
Indicate for each transaction whether a sales (S) or use (U) tax applies or whether the transaction is nontaxable (N). Where the laws vary among states, assume that the most common rules apply. All
Using the following information from the books and records of Grande Corporation, determine Grande’s total sales that are subject to State C’s sales tax.Grande operates a retail general
Chang Corporation is part of a three-corporation unitary business. The group has a water's edge election in effect with respect to unitary State Q. State B does not apply the unitary concept with
True Corporation, a wholly owned subsidiary of Trumaine Corporation, generated a $400,000 taxable loss in its first year of operations. True's activities and sales are restricted to State A, which
Kim Corporation, a calendar year taxpayer, has manufacturing facilities in States A and B. A summary of Kim’s property holdings follows.Determine Kim’s property factors for the two states
Josie is a sales representative for Talk2Me, a communications retailer based in Fort Smith, Arkansas. Josie's sales territory is Oklahoma, and she regularly takes day trips to Tulsa to meet with
Quinn Corporation is subject to tax in States G, H, and I. Quinn’s compensation expense includes the following.Officers' salaries are included in the payroll factor for G and I, but not for H.
State E applies a throwback rule to sales, while State F does not. State G has not adopted an income tax to date. Clay Corporation, headquartered in E, reported the following sales for the year. All
Roger Corporation operates in two states, as indicated below. This year's operations generated $400,000 of apportionable income.Compute Roger's State A taxable income assuming that State A apportions
Dillman Corporation has nexus in States A and B. Dillman’s activities for the year are summarized below.Determine the apportionment factors for A and B assuming that A uses a three-factor
Fallow Corporation is subject to tax only in State X. Fallow generated the following income and deductions. State income taxes are not deductible for X income tax purposes.Sales
In no more than three PowerPoint slides, list some general guidelines that a taxpayer can use to determine whether it has an obligation to file an income tax return with a particular state. (Include
Perk Corporation is subject to tax only in State A. Perk generated the following income and deductions.Federal taxable income ………………………............…………..
For each of the following items considered independently, indicate whether the circumstances call for an addition modification (A), a subtraction modification (S), or no modification (N) in computing
Sante Fe Corporation's sales office and manufacturing plant are located in State A. Sante Fe also maintains a manufacturing plant and sales office in State B. For purposes of apportionment, State A
Isle Corporation's entire operations are located in State A. Of Isle's $600,000 sales, 60% are made in State A and 40% are made in State B. Isle's solicitation of sales in State B is limited to
Beckett Corporation realized $800,000 of taxable income from the sales of its products in States A and B. Beckett's activities establish nexus for income tax purposes in both states. Beckett's sales,
Legends Corporation owns and operates two manufacturing facilities, one in State A and the other in State B. Due to a temporary decline in sales, Legend has rented 25% of its State A facility to an
Complete the following chart by indicating whether each item is true or false. Explain your answers by referencing the overlap of rules appearing in Federal and most state income tax laws. True or
Castle Corporation conducts business in States 1, 2, and 3. Castle's $630,000 taxable income consists of $555,000 apportionable income and $75,000 allocable income generated from transactions
As the director of the multistate tax planning department of a consulting firm, you are developing a brochure to highlight the services it can provide. Part of the brochure is a list of five or so
Your client, Royal Corporation, generates significant interest income from its working capital liquid investments. Write a memo for the tax research file, discussing the planning opportunities
Your client, Ecru Limited, uses a small sales force to solicit sales of its whole sale restaurant supplies. Ecru is based in State W, and the sales representatives are assigned territories in States
Your client, HillTop, is a retailer of women's clothing. It has increased sales during the holiday season by advertising gift cards for in-store and online use. HillTop has found that gift card
Create a PowerPoint outline describing the major exemptions and exclusions from the sales/use tax base of most states. Use your slides to discuss this topic with your accounting students' club.
Evaluate this statement: An S corporation can facilitate the meeting of its state income tax filing obligations by developing a common spreadsheet that allocates and apportions income among the
The trend in state income taxation is for states to adopt a version of the unitary theory of multijurisdictional taxation in their statutes and regulations.a. Explain why some states are attracted to
Keystone, your tax consulting client, is considering an expansion program that would entail the construction of a new logistics center in State Q. List at least five questions you should ask in
Bob Roman, the major owner of an S corporation, approaches you for some tax planning help. He would like to exchange some real estate in a like-kind transaction under § 1031 for real estate that may
Blue is the owner of all of the shares of an S corporation, and Blue is considering receiving a salary of $110,000 from the business. She will pay the 7.65% FICA taxes on the salary, and the S
Bonnie and Clyde each own one-third of a fast-food restaurant, and their 13-year-old daughter owns all of the other shares. Both parents work full-time in the restaurant, but the daughter works
Flint, an S corporation with substantial AEP, reports operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest
Whindy Corporation, an S corporation, reports a recognized built-in gain of $80,000 and a recognized built-in loss of $10,000 this year. Whindy holds an $8,000 unexpired NOL carryforward from a C
In Problem 44, how much of the Whitman loss belongs to Ann and Becky? Becky’s stock basis is $41,300.In problemAt the beginning of the year, Ann and Becky own equally all of the stock of Whitman,
Maple, Inc., is an S corporation with a single shareholder, Bob Maple. Bob believes that his stock basis in the entity is $50,000, but he has lost some of the records to substantiate this amount.
Assume the same facts as in Problem 38, except that the cash distribution to Lizzie amounts to $40,000. Determine Lizzie’s stock basis at the end of the year, and the treatment of her cash
At the beginning of the tax year, Lizzie holds a $10,000 stock basis as the sole shareholder of Spike, Inc., an S corporation. During the year, Spike reports the following. Determine Lizzie’s stock
Assume the same facts as in Problem 36, except that the two shareholders consent to an AAA bypass election.
Mary is a shareholder in CarrollCo, a calendar year S corporation. At the beginning of the year, her stock basis is $10,000, her share of the AAA is $2,000, and her share of corporate AEP is
Kaiwan, Inc., a calendar year S corporation, is partly owned by Sharrod, whose beginning stock basis is $32,000. During the year, Sharrod’s share of a Kaiwan long-term capital gain (LTCG) is
Jonas is a 60% owner of Ard, an S corporation. At the beginning of the year, his stock basis is zero. Jonas’s basis in a $20,000 loan made to Ard and evidenced by Ard’s note has been reduced to
Vogel, Inc., an S corporation for five years, distributes a tract of land held as an investment to Jamari, its majority shareholder. The land was purchased for $45,000 ten years ago and is currently
Holbrook, a calendar year S corporation, distributes $15,000 cash to its only shareholder, Cody, on December 31. Cody’s basis in his stock is $20,000, Holbrook’s AAA balance is $8,000, and
Greiner, Inc., a calendar year S corporation, holds no AEP. During the year, Chad, an individual Greiner shareholder, receives a cash distribution of $30,000 from the entity. Chad’s basis in his
Noelle, the owner of all of the shares of ClockCo, an S corporation, transfers her stock to Grayson on April 1. ClockCo reports a $70,000 NOL for the entire tax year, but $10,000 of the loss occurs
Dion, a shareholder, owned 20% of Meadow Brook’s stock for 292 days and 25% for the remaining 73 days in the year. Using the per-day allocation method, compute Dion’s share of the following S
TyroneCo, an S corporation with a positive E & P balance, reports gross receipts for the year totaling $400,000 (of which $200,000 is PII). Expenditures directly connected to the production of
Sheila Jackson is a 50% shareholder in Washington, Inc., an S corporation. This year, Jackson’s share of the Washington loss is $100,000. Jackson has income from several other sources. Identify at
For each of the following independent statements, indicate whether the transaction will increase (+), decrease (–), or have no effect (NE) on the basis of a shareholder’s stock in an S
Collette’s S corporation holds a small amount of accumulated earnings and profits (AEP), requiring the use of a more complex set of distribution rules. Collette’s accountant tells her that this
A new client, John Dobson, recently formed John’s Premium Steakhouse, Inc., to operate a new restaurant. The restaurant will be a first-time business venture for John, who recently retired after 30
A personal service corporation (PSC) generally is limited to the calendar year for reporting purposes. One exception to this rule is when the PSC can demonstrate a business purpose for a fiscal
In the current year, Juanita and Joseph form a two-member LLC and do not file Form 8832 (Entity Classification Election). As a result, the LLC will be treated as a partnership for Federal tax
In the current year, Pelican, Inc., incurs $10,000 of meals and entertainment expenses that it deducts in computing net income per the corporation’s financial statements. All of the meals and
Red Corporation and White Corporation, both calendar year C corporations, are members of a controlled group of corporations. For the current year, Red has taxable income of $130,000, and White has
During the current year, Swallow Corporation, a calendar year C corporation, has the following transactions:Income from operations …………………………………
White Corporation, a calendar year C corporation, manufactures plumbing fixtures. For the current year, White has taxable income [before the domestic production activities deduction (DPAD)] of
Joel is the sole shareholder of Manatee Corporation, a C corporation. Because Manatee’s sales have increased significantly over the last several years, Joel has determined that the corporation
In the current year, Plum, Inc., a closely held C corporation, has $410,000 of net active income, $20,000 of portfolio income, and a $75,000 passive activity loss.What is Plum’s taxable income for
Virginia owns 100% of Goshawk Company. In the current year, Goshawk Company sells a capital asset (held for three years) at a loss of $40,000. In addition, Goshawk has a short-term capital gain of
In the current year, Tanager Corporation (a C corporation) had operating income of $480,000 and operating expenses of $390,000. In addition, Tanager had a long-term capital gain of $55,000 and a
Benton Company (BC) has one owner, who is in the 33% Federal income tax bracket. BC’s gross income is $395,000, and its ordinary trade or business deductions are $245,000. Compute the Federal
In the current year, Wilson Enterprises, a calendar year taxpayer, suffers a casualty loss of $90,000. How much of the casualty loss will be deductible by Wilson under the following
Compute the income tax liability for each of the following unrelated C corporations.a. Darter Corporation has taxable income of $68,000.b. Owl Corporation has taxable income of
Art, an executive with Azure Corporation, plans to start a part-time business selling products on the Internet. He will devote about 15 hours each week to running the business. Art’s salary from
Compute the charitable contribution deduction (ignoring the percentage limitation) for each of the following C corporations.a. Amber Corporation donated inventory of clothing (basis of $24,000, fair
Hummingbird Corporation, a closely held C corporation that is not a PSC, has $40,000 of net active income, $15,000 of portfolio income, and a $45,000 loss from a passive activity. Compute
In the current year, Woodpecker, Inc., a C corporation with $8.5 million in assets, deducted amortization of $40,000 on its financial statements and $55,000 on its Federal tax return. Is Woodpecker
Schedule M–1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporation’s income tax return as follows: net income per books + additions –
When are C corporations required to make estimated tax payments? How are these payments calculated?
Determine whether the following expenditures by Cuckoo Corporation are organizational expenditures, startup expenditures, or neither.a. Legal expenses incurred for drafting the corporate charter and
Barbara owns 40% of the stock of Cassowary Corporation (a C corporation) and 40% of the stock of Emu Corporation (an S corporation). In the current year, each corporation has operating income of
Marmot Corporation pays a dividend of $100,000 in the current year. Otter Corporation, which is in the 25% marginal bracket, owns 15% of Marmot’s stock. Gerald, an individual taxpayer in the 25%
Osprey Corporation, a closely held corporation, has $100,000 of net active income, $25,000 of portfolio income, and a $120,000 loss from a passive activity.a. How much of the passive loss can Osprey
A taxpayer sells a warehouse for a recognized gain. Depreciation had been properly claimed on the property, based on the straight-line method over a 39-year recovery period. Will the same amount of
John (a sole proprietor) and Eagle Corporation (a C corporation) each recognize a long-term capital gain of $10,000 and a short-term capital loss of $18,000 on the sale of capital assets. Neither
In the current year, Jeanette, an individual in the 25% marginal tax bracket, recognized a $20,000 long-term capital gain. Also in the current year, Parrot Corporation, a C corporation in the 25%
Jennifer and Jamie are starting a business and have asked you for advice about whether they should form a partnership, a corporation, or some other type of entity. Prepare a list of questions you

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