Consolidated Lint Inc. is organized in Delaware with headquarters in New York. The Company had federal taxable income of $600,000 in 2020 after deducting $100,000 of New York taxes. In 2019 Consolidated Lint Inc. sold $100,000 of lint to New York customers and shipped $3,000,000 to all customers around the world. New York has single sales factor apportionment. New York has rolling conformity with the Internal Revenue Code.

1. Say that Consolidated Lint Inc. decided that instead of diversifying into jet engines, it decided to stick with what it knew and developed a line of stuffed animals which it sold to stores. 70 percent of the Companys lint production was utilized by the Toy Division to fill in the stuffed animals. Is it likely or not likely that these to divisions constitute a single unitary business?

2. In 2019, the Treasury unit of Consolidated Lint (located at its Company headquarters at 40 Wall Street) purchased 1 percent of the outstanding stock of Augo Inc., a gold mining company listed on the New York Stock Exchange. In 2013, the stock is sold for a $100,000 profit. Can Connecticut (assuming Consolidated Lint has lint business nexus in CT) tax the gain on stock?

a. Can Connecticut require Consolidated Lint to allocate interest and other expenses against non-unitary income? Why might it require this?

b. Can Connecticut require Consolidated Lint to allocate all of its interest expense to offset non-unitary income?

2. Say instead that the treasury unit purchased 30-day commercial paper of the Company in May 2019 and earned $100,000 in interest income. Can Connecticut (assuming Consolidated Lint has lint business nexus in CT) tax the interest income?

3. In 2020, Consolidated Lint had nexus in New Jersey, the lint capital of the world. The Company stores 90 percent of its raw lint inventory in New Jersey warehouses. New Jersey apportions taxable income using a formula that utilizes inventory property in New Jersey divided by inventory property all over the world. Accordingly, Consolidated lint has a 90 percent apportionment factor in New Jersey.

1. Is the business income earned by the company from the sale of inventory apportionable to New Jersey?
2. Is the States apportionment formula internally consistent?
3. If the Companys plant and equipment, mines, labor force and management are entirely located outside New Jersey does the issue arise as to whether the Company is being subjected to fair apportionment?
4. What should the Company be prepared to prove were it to petition for fair apportionment?
5. Is this fact pattern closer to Hans Rees or Butler Brothers?

3. 4. What if Consolidated Lint sold all its inventory to a single customer in Maryland. Accordingly, its New York apportionment (single sales factor) is zero percent and its Maryland apportionment (single sales factor) is 100 percent (assuming nexus in that State. Could New York State argue for alternative apportionment.
   1. Could the Taxpayer in Maryland argue for fair apportionment?