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 In 2020, Consolidated Lint Inc became concerned about an increasingly competitive market for lint Seeking to diversify and increase corporate earnings, the Company started to invent and build new jet engines for the Air Force at a new location in California In 2020, the Lint Division had a good year earning $4,000,000 in federal taxable income while the new Jet Engines Division lost $500,000 in federal taxable income In New York, the Lint Division had apportionment of 40 and the Jet Engines Division had apportionment of 10 Collectively the two divisions had NY apportionment of 35 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 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 Could the Taxpayer in Maryland argue for fair apportionment 8 In February 2020, Consolidated purchases the business of its competitor Abi Gizent (Be Healthy ) Lint of Bismarck, North Dakota a Are the activities of this business unit unitary with the operations of Consolidated Lint in 2020 b 2021 There is a variance in how the states approach the unitary principal which is discussed in the book For example, Arizona adopts to the Operational Interdependence Test Can the State rules be less stringent than the federal concept of unitary More stringent

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 11, 2024

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

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.In 2020, Consolidated Lint Inc. became concerned about an increasingly competitive market for lint. Seeking to diversify and increase corporate earnings, the Company started to invent and build new jet engines for the Air Force at a new location in California. In 2020, the Lint Division had a good year earning $4,000,000 in federal taxable income while the new Jet Engines Division lost $500,000 in federal taxable income. In New York, the Lint Division had apportionment of 40% and the Jet Engines Division had apportionment of 10%. Collectively the two divisions had NY apportionment of 35%.
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.
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?

8. In February 2020, Consolidated purchases the business of its competitor Abi Gizent (Be Healthy!) Lint of Bismarck, North Dakota.

a. Are the activities of this business unit unitary with the operations of Consolidated Lint in 2020?

b. 2021?

There is a variance in how the states approach the unitary principal which is discussed in the book? For example, Arizona adopts to the "Operational Interdependence Test. Can the State rules be less stringent than the federal concept of unitary? More stringent?