Questions and Answers of Principles Of Taxation

Do tax incentives run afoul of constitutional law restrictions? Explain.
Examine the sales and use tax statutes of your home state and determine the following:A. What is the type of sales tax imposed by the state?B. On whom is the legal imposition of the sales tax?C. How
Read the full decision of the U.S. Supreme Court in Quill Corp. v. North Dakota, 504 U.S. 298, 112 S.Ct. 1904 (1992).A. Does the Court’s decision imply that there is a different nexus standard for
What are the advantages and disadvantages of a property tax?
For your state, list realty that is exempt from property tax, e.g., realty owned by a church.
For your state, list whether inventory is subject to property tax, and if so, describe the valuation method used and the assessment date.
Most individual taxpayers view a property tax as being a tax on real estate. Discuss what other types of property can be subject to the property tax. Discuss also the problems, if any, in
For five of your neighboring states, identify all of the different types of property that are subject to taxes in those states.
Assume that an office building typically yields a net income of $$1.5$ million per year. The county has assessed the building at $$20$ million, based on the price of comparable buildings sold in
What are three main methods of valuing property for property tax purposes?
Your client is in the process of building a new factory. What sort of detail would you suggest the client keep regarding its costs?
What is the constitutional significance of the equality and uniformity clause found in state constitutions?
Research the state constitutions of your five neighboring states and find the exact language of their equality and uniformity clauses. Discuss how each state’s clause differs from the others and
Your client, who owns several factories, has for years paid the property tax assessed without question. What sort of information might you request from the client in an attempt to reduce the
Why is it important to distinguish between a tax and a fee? What characteristics are associated with these two levies?
Why is it important to distinguish between a property tax and an excise tax? What characteristics are associated with these two levies?
How is an employer’s unemployment tax rate determined?
“Dog Delight must go,” declared Mary Gold, Chief Executive Officer (and majority shareholder) of publicly traded PET Publications, Inc., (PPI) at the quarterly Board of Directors meeting last
What methods can be used to reduce a client’s unemployment tax rate?
What is the lowest rate in your state? The highest?
What industries typically have the higher rates—and which the lower?
What is the likely impact of e-commerce on unemployment taxes?
Which of the following is potentially a planning technique to reduce unemployment taxes?• Avoiding employee classification?• Employee leasing?• Operating in a new state?• Acquisition of
What are the common state tax issues that arise in a taxable stock acquisition?
For your state, determine its conformity with federal rules for:1. A, B, and C reorganizations 2. Section 338(h)(10)
What are the common state tax issues that arise in a taxable asset acquisition?
Smithco is considering acquiring the assets of Jonesco. It had considered buying Jonesco stock, but Smithco is concerned about unknown or contingent liabilities. Smithco is a New Jersey company,
What are the common state tax issues that arise in tax-free reorganizations?
Assume the same facts as in Problem 7.2, except that a taxable versus tax-free stock acquisition is being considered.Problem 7.2Smithco is considering acquiring the assets of Jonesco. It had
What nonincome franchise tax issues should the consultant be concerned with in M&A transactions?
Swenco is a Delaware investment holding company with an annual net income of $$100$ million. Swenco does not pay dividends. Its only subsidiary, XYZ Refining, refines crude oil, generating $$70$
What state tax issues should a consultant be concerned with for a purchasing company in an M&A transaction?
Gupta Products is a C corporation that sells mail-order items nationally from its office in Nevada. It has no property or payroll in other states, uses a common carrier for shipping, and generates
If we are the seller, why do we care about the buyer’s tax consequences?A. Because we are nice and want to be fairB. If we structure a deal that saves them taxes, they may pass on some of the tax
A mid-cap technology company has received a $$50$ million offer to be purchased by a larger company. The purchaser is open to numerous ways to structure the deal: a stock or an asset purchase, plus
Which of the following are true?A. Most states honor 338 (g) elections, but not 338 (h) electionsB. Most states honor 338 (h) elections, but not 338 (g) electionsC. Neither a nor b is true
In a taxable asset acquisition, which of the below is true with regard to the federal treatment?A. For the gain or loss that is recognized on a sale, its character is determined by type of assetB.
How can sales taxes be avoided in an M&A transaction?A. Purchaser may be able to avoid tax if transaction qualifies under casual sales rulesB. Purchaser may be able to avoid tax if transaction
In general, which of the following are requirements for a valid bulk sale to occur?A. All the assets have to be sold to a single buyerB. All the assets have to be sold in a single transactionC. All
Rework Example 8.7, assuming your state is the new state. Example 8.7-A manufacturing firm has its principal facilities in a state with a 8% tax rate. It locates a new plant in a state with an 6% tax
In due diligence, what would one check for past (or potential) exposure to:• Income/franchise taxes?• Sales/use taxes?• Gross receipts taxes?• Property taxes?• Employment taxes?
Which is more important—tax incentives, nontax incentives, or other reasons—for locating in a new state? Explain.
What are the tax incentives offered in your state?
Rework Example 8.7, assuming your state is the old state. Example 8.7-A manufacturing firm has its principal facilities in a state with a 8% tax rate. It locates a new plant in a state with an 6% tax
Assume that tax incentives are a zero-sum game. That is, whatever one state gains in new business, another state loses. Do incentives make sense in such a setting?
Is a state (or area of a state) with the best tax incentives the best place to do business?
Assume you are advising a client on whether to operate in new states with multiple tax incentives. However, the client firm has never had any business connections to the states before. What are the
Which of the following are true?A. Credits are more valuable on federal returns than state tax returnsB. As a practical matter, credits and incentives are the sameC. Tax practitioners are usually
Which of the following are true?A. In most states, a resident is anyone physically present for other than a temporary purposeB. Residence and domicile are not the same thingC. A person can have more
Which of these are informative for determining the tax residence of a multiple-home taxpayer?A. Time spent in state relative to other statesB. Time spent in state by immediate familyC. Substantiality
Is most law on residency based on statutory or case law?
State auditors typically ask about/for which of the following when determining residency?A. All state drivers’ licensesB. Previous and other current addresses within and without the stateC. The
How many states have no personal income tax?A. FiveB. FourC. ThreeD. TwoE. One
True or false: most states’ taxable income calculations start with federal taxable income.
Which of the following do states typically NOT tax?A. Social security benefitsB. Illegal incomeC. Gambling winningsD. Capital gainsE. None of the above
What is a reciprocity agreement? Do most states have them?
What are the different types of sales taxes currently in use in the United States? Specifically, how do they differ from each other?
What are the key criteria that must be satisfied for a retail sales tax to apply?
Discuss what is meant by the term tangible personal property.
In determining whether an asset is tangible or intangible personal property for the purpose of sales and use taxation, do the following play any role? If yes, why?A. The taxpayer’s treatment of
What is the rationale, if any, for states to generally exclude services from their sales tax base?
What is the true object test? In what connection has this test been used?How have the courts operationalized this test? Apart from the cases discussed in the text, locate one or more cases in your
With regard to the taxation of the sale of software:A. Is there a clear distinction between canned and custom soft¬ware? Is there any valid reason for drawing the distinction be¬tween canned and
Define the term sale. Discuss what exactly the term retail sale means.
What are some of the principal exemptions from the sales tax base that are typically found in most state statutes? Explain the rationale of some of these exemptions.
What is a resale exemption certificate? Who provides this certificate—and to whom?
Is the sale of an entire business exempt from sales tax? Under what circumstances might such a sale be exempt?
The base of the sales tax is either sales proceeds or gross receipts. In general, discuss whether the following are included or excluded from the sales tax base:• Returns and allowances• Bad
What is (are) the basic principle(s) underlying a retail sales tax? How do the state statutes attempt to be faithful to these principles?
Define nexus. What is the minimum nexus standard for sales and use tax purposes? After reviewing the U.S. Supreme Court cases mentioned in this chapter, do you think that the Court’s opinion has
Does a reading of the Court’s opinion suggest that the nexus standard for sales tax imposition is different from the nexus standard for use tax collection obligation?
What are the basic reporting obligations of the taxpayer for sales tax purposes?
Suppose you were advising a new client who is just starting a business in a state that imposes a sales tax. What types of records would you advise this client to keep so as to help in meeting the
For purposes of sales tax audits, auditors use either the block sampling method or the random or statistical sampling method.A. What is the difference between the two sampling methods?B. If you were
What is meant by the term statute of limitations'? What is the typical statute of limitation for sales tax purposes?
Sales and use taxes raise many important public policy questions that have been part of the national political debate and several recent presi¬dential elections. Some of the key questions in this
What factors are used to distinguish between a tax and a fee? Why do we care whether a levy is a tax or a fee?
What is the importance of distinguishing between a property tax, an excise tax, and an income tax?
Are tax incentives ethical?
Are taxes a quid pro quo?
Define the term nexus. Does nexus require a physical presence? Does nexus mean the same thing for different types of taxes?
What is meant by substantial nexus? How is it achieved?
Does substantial nexus require a physical presence? Does substantial nexus imply or require a substantial physical presence?
Assume your client receives a nexus questionnaire from a state. What should you advise them to do?A. Do nothing—the state will eventually give upB. Ask the state how much they think your client
Which of the following are characteristics of fees?A. They are usually smaller in amount than taxesB. They are a voluntary paymentC. They are made to a segregated fundD. They are for a specific
Which of the following clauses from the U.S. Constitution are used to challenge state laws?A. Equal Protection ClauseB. Privileges and Immunities ClauseC. Due Process ClauseD. Commerce ClauseE. Santa
For your home state, do the following:• Identify and list the different taxes imposed.• Obtain the text of the uniformity and equality constitutional provision.• Compare the provision to the
Prepare brief written summaries of the following cases:• Lehnhausen• Complete Auto Transit Corp. v. Brady• Quill Corp.• Wayfair Organize your brief using the following sections:A. FactsB.
What are the typical criteria for nexus for income/franchise tax purposes?
How do we usually distinguish between business and nonbusiness income? How are the two treated?
How does double weighting of the sales apportionment factor favor firms that are located in a state? How does the absence of a throwback rule do the same?
What are the common definitions of a unitary business?
What are the basic differences between unitary and separate accounting states?
Which states have no corporate taxes?
Which states have taxes based on gross receipts?
Is there a basic framework for state corporate income tax laws?A. No, each state is completely independent and there is no such framework B. Yes, states are strictly prescribed by the U.S. Congress
California and New York impose a franchise tax which is computed like a corporate income tax. Which of the following generate nexus for a franchise tax?A. Corporation does business in the state B.
What is the standard federal NOL carryback/carryforward period and how do states differ?
What is the standard federal dividends-received deduction, and how do states differ?
Depreciation and depletion is a typical state adjustment: true or false?

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