W Caps lock A S D H N M Alt In May 2024, Warbucks, Inc's largest customer in State Brown informed the Company that it no longer wanted goods shipped, via common carrier, "FOB 25 Smith Street, Brown City, Brown" Instead, it wanted goods shipped "FOB shipping point" (which is either the factory in State Red or the factory in State Pink.) True/False: This change in shipping terms will not affect the computation of the sales factor in States Red or Pin In January 2024, the entire workforce at Warbucks, Inc.'s state Pink factory went on strike, demanding a 2% salary raise and a 15-minute lunch break. For three months the factory was forced to operate with replacement workers employed by Rent-a-car Inc. Warbucks, Inc. makes $2,000,000 of payments to Rent-a-Scab, Inc. until the strike is settled. True/False: It will minimize their State Pink taxes for the Company to consider the payments to Rent-A-Scab as wages in computing their State Pink apportionment. The Remaining Questions on the Exam utilize these facts: Warbucks, Inc manufactures auto parts that are shipped to General Motors and Ford. It operates factories in States Pink and Blue. The Company is organized under the laws of Delaware and is headquartered in State Blue. All of the states Warbucks operates within utilize the UDITPA statute to apportion business income and allocate non-business income. The next two questions rely upon these facts: In July 2024, the Company sold vacant land it had purchased in State Red. The land had never been utilized in the business. The land had been purchased in 2004 for $500,000 and was sold in 2024 for $570,000. Joe, an employee of the Company, was paid $5,000 in 2024 to take care of the land. 5. Fill in the Blank: The gain on the sale will be allocated to State 6. True/False: The $5,000 paid to Joe can be included in the wage factor denominator on the Company's State Pink tax return. 7. For purposes of this question only, assume that Warbucks, Inc. sold all of its assets in States Red and Blue in 2023, consolidating all of its operations in State Pink; i.e., all of its assets were now located in State Pink and none of its employees ever left State Pink in 2024. All the company's manufactured auto parts were shipped to a single customer located in State Yellow. State Yellow does not impose a corporate income tax, but it does impose a gross receipts tax and Warbucks, Inc paid $300,000 in gross receipts tax in 2024. True/False: Warbucks, Inc. is not required to apportion all of its taxable business income to State Pink. In 2024, the Company secured a $1,000,000 federal income tax deduction for certain pollution 8. control equipment it purchased. The deduction was authorized by a new law enacted in 2024 by Congress on April 28, 2024. State Blue has adopted into its tax law a "rolling conformity" provision. State Pink, on the other hand, has a "fixed conformity" provision; i.e., under its law, federal taxable income is computed utilizing the Internal Revenue Code in effect on June 30, 2016. On May 5, 2024 the State Pink legislature enacted a "modification" to its tax law allowing a similar deduction for pollution control equipment. True or False: The Company will secure $1,000,000 deductions in both states Pink and Blue. The next two questions are based on the following facts In 2019 Warbucks, Inc. purchased 20,000 shares of Boogle, Inc, which is less than a 2 percent interest in the shares of Boogle Inc. Boogle Inc. is an internet search engine company. In tax year 2023, Boogle Inc. paid a dividend of $500,000.H N say, for purposes of this question, that the lease between Annie, Inc and Warbucks, Inc, was for purchase. 17 650,000 a year and not $200,000 a year. True/False: It is more likely than not that Annie, Inc.. will be required to pay sales tax on the $1,000,000 purchase price at the time of the June 30th The next two questions are based upon the following facts: In April 2022, Warbucks, Inc. purchases Picard Industries, a French corporation that manufactures auto parts for the French automobile industry at it London UK plant. Picard Industries has no USA operations. State Brown allows unitary taxpayers to elect world-wide combined reporting. State Brown determines taxable income by making modifications to the taxpayer's federal taxable income. In the definitional section of the State Brown income tax law, federal taxable income is defined as the taxable income calculated using the Internal Revenue Code that was in effect on January 1, 2016. 18. True/False: Assuming that Warbucks, Inc. and Picard Industries constitute a single unitary business, and the worldwide election is made, Picard Industries will be required, among other things, to include all their British and French property, payroll and sales (once translated into US dollars) in the apportionment factor denominators of the State Brown tax return. 19. In September 2024, Picard pays a $400,000 dividend to Warbucks, Inc. Warbucks, Inc. files a separate company tax return in State Pink. True/False: Even if Warbucks, Inc. and Picard constitute a single unitary business, it will be unconstitutional to include the dividend in the apportionable business income of the Company's State Pink tax return. 20. Oliver Warbucks Ill is the CEO of Warbucks, Inc. and his adopted daughter Annie, an aspiring cabaret singer, is a part-time bookkeeper at the Company overseeing sales tax collection and payments. Oliver owns 98% of the Company stock. The remaining 2% is owned by a Mr. Rooster Cogburn. In 2024, the Company collected $50,000 in taxes that were never remitted to the government. True/False: Oliver and Annie may both be held personally liable to pay the unremitted tax from their personal funds. 21. In 2024, Warbucks, Inc. purchased $5,000,000 of steel and $200,000 of Kormoxcide, a chemical that is used to soak the steel before it is fabricated into auto parts. All the Kormoxcide is drained away after use; none of it remains chemically present in the finished auto parts. As part of their respective sales tax laws, State Red uses the so-called "substantiality test" and State Pink utilizes the so-called "economic consumption" test. Choose the best answer: The purchase of the Kormoxcide is subject to sales tax in both Red and Pink. a . The purchase of the Kormoxcide is not subject to sales tax in either Red or Pink. C . The purchase of the Kormoxcide is subject to sales tax in Red but not Pink. d. The purchase of the Kormoxcide is subject to sales tax in Pink but not Red. The next three question rely upon the following additional facts: In 2021, Warbucks, Inc. purchased in the same transaction (1) a new steel cutting saw for use in its State Red facility, (2) a refrigerator for use in the employees' lunchroom in State Red, and a (3) warranty contract covering repairs to the saw and the refrigerator for five years. State Red has a sales tax rate of 10%. The vendor for this purchase sent Warbucks, Inc. an invoice that read: Saw, refrigerator, warranty.....$ 25,000 22. True or False: Sales tax of $2,500 will result from this transaction. gnunuooos'sDel 2 6 & backspace Tab Q W E R Caps Lock A S D Enter Shift TO Fn 9. True/False: Under US Constitutional standards, the dividend constituted apportionable income End in 2023. 10. In January 2024, the management of Warbucks, Inc. had a change of mind about Boogle, with them now thinking that they would like to purchase all of the shares of the Company and utilize it in their auto supply business. Accordingly, Warbucks, Inc. purchased 100 percent (100%) of Boogle with the intention to use the Boogle Inc. platform to make direct-to-customer sales of auto parts instead of selling to General Motors and Ford. The acquisition is an immediate success as Company sales increase dramatically in 2022. State Pink has a "combined reporting" income tax law. True or False: it is more likely than not that State Pink can, without violating any provision of the US Constitution, require Warbucks, Inc. and Boogle Inc. to file a combined report. 11. In April 2024, John Jones, a resident of State Gray, purchased a replacement transmission for his 1964 Mustang from Warbucks, Inc. John stores the transmission in his garage, thinking that he will install the transmission in 2023 when he plans to overhaul the Mustang. True or False: John will not owe use tax on his purchase until that time in 2025 when he places the part into service 12. In 2024, Warbucks, Inc. purchased $500,000 of cleaning supplies to keep its State Pink facilities clean. True or False: Because this is a cost that Warbucks, Inc. effectively passes on to its customers in the form of higher prices for its car parts, it does not have to pay sales tax on these cleaning supplies. The next two questions are based upon the following facts In 2022, Warbucks, Inc. purchased a patent for a new muffler system developed by a French Company. They pay $800,000 for the patent. The patent comes supplied with 50 pages of blueprints. The purchase is made in State Blue, at the headquarters of Warbucks, Inc. State Blue utilizes the so-called "physical usefulness" test in determining whether combined purchases intangible property and tangible personal property are taxable. 13. True/False: A sales or use tax is, more likely than not, due to State Blue. 14. True/False: On the Company's 2024 State Blue income tax return, the cost of the patent will be entirely excluded from both the numerator and the denominator of the property factor. The next three questions are based upon the following facts: On June 30 2024, Warbucks, Inc. purchases land in State Pink for $1,200,000. It plans to utilize the land for a new plant that it will self-construct on the land over a three-year period. In May 2024, Warbucks, Inc. also sets up a new subsidiary, Annie, Inc., which purchases a $1,000,000 construction crane. Annie Inc. entered into a three-year lease with Warbucks, Inc. whereby it leases the crane to Warbucks, Inc. for $200,000 a year. At the end of three years Annie plans to sell the crane for $500,000. There is strong objective evidence that a three-year-old crane will have a fair market value of $500,000 at the end of the three-year lease term. 15. True/False: On the Company's 2022 State Pink tax return, it will include $600,000 as the average cost of the land in both the numerator and the denominator of the property factor. 16. True/False: Annie, Inc. will not pay sales tax on the $1,000,000 cost of the crane and Warbucks, Inc. will not pay sales tax on the cost of the land