Video: Multijurisdictional Tax Issues - Practice Questions

In this lesson, Nick Palazzolo, CPA, tackles the complexities of multijurisdictional tax issues through a series of practice questions, making it easier to grasp the intricacies involved. Get ready for a deep dive as Nick guides you through the calculation of a corporation's state apportionment ratio, demonstrating the process using an equally weighted three-factor formula. Later, he clarifies the conditions under which a controlled foreign corporation located in Ireland realizes subpart F income. With Nick's clear explanations, you'll learn to navigate the nuances of cross-border taxation and apply critical thinking to address potential exam questions on this topic. Keep up with Nick's logical reasoning to stay sharp and confident in tackling these multifaceted tax challenges.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Let's dive into a multiple choice question here on our multi-jurisdictional tax issues. We've got a lot of issues, don't we? And these issues just happen to be dealing with multi-jurisdictional tax. Starting off, well, we got a lot of information. I don't want to read that until we read the question, so let's do such that. What is the corporation's year one state apportionment ratio for state B? That's a great question. Let's take a look and read through what we've got. Well, let's say a corporation conducted all of its business activities in states A and B and generated $1 million of pre-tax income in year one. The tax rate is 10% in state A and 5% in state B. Both states apportion the taxable income of multi-state corporations by employing an equally weighted three-factor apportionment formula. Neither state allows a tax deduction for state corporate income taxes. At the end of year one, the corporation reported the following percentages for its activities in each state for the purposes of calculating the state apportionment factors. Here we go. We got payroll expense, sales, and net property value. These are great factors because, well, guess what? How much you conduct your activity and your business in a state will probably depend on your payroll, your individuals, your employees, sales, how much you generate in revenue, and then your net property value. If you got all your property in one state, well, that's going to affect it very much more so than having it in both states equally. What's our ratio here? Well, the state apportionment factor is used to determine the amount of corporate income tax that corporations must pay to a particular state, and in this case, we're worried about state B. What are we going to do

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C corporations

Module: 3 Concepts, 30 Videos

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Introduction to Consolidated Tax Returns

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Entities Not Able to File a Consolidated Return

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