Answer the questions described below. Please make sure to include citations to appropriate authorities.
A. Please defend Alixco’s non-unitary tax filing position.
B. How should the items of income for each company be characterized between business and non-business income? Please prepare your response assuming the auditor has prepared his audit report based on the MTC regulations.
C. Describe how sales of Alixco into California would be apportioned on the combined Missouri tax return and how sales of Alixco into California would be apportioned on the combined California corporate tax return (assuming California follows the “Finnigan” rule). Why?
Smith’s Home Hardware is a successful Arizona based retail operation, realizing significant profits from its retail hardware stores. Smith’s creates a subsidiary (“Alixco”) by contributing $70 million of capital. The contribution of capital includes: $15 million of inventory, $15 million of CD’s, a $10 million office building in Missouri, and patents on high-tech power tools worth $30 million. Alixco’s offices are entirely in Missouri. Alixco will manufacture and sell power tools to the construction industry. In 2001, Alixco realizes income as follows: tool sales $100 million, interest on commercial CD’s $50,000, rent from 9 floors of its 10-story office building $1.5 million, and royalty income of $3 million from overseas licensing of its tool patents. Total business deductions for the year are $85 million.
Alixco hires a president in Missouri. Officers of Smith’s Home Hardware make up the balance of the Board of Directors and Officers. Smith’s internal accounting staff in Arizona maintains the books. A CPA firm in Missouri prepares annual financial statements. The only assets held by Alixco are those mentioned above, plus a newly constructed manufacturing plant in New Mexico and another newly constructed plant across the border in Mexico.
The $15 million of CD’s and $10 million office building were acquired with funds available from retail hardware store operations. Smith’s Home Hardware and Alixco file a consolidated federal tax return. Smith’s Home Hardware files a separate California tax return from Alixco. During 2001, Smith’s Home Hardware received $2 million in dividends from Alixco, which was used to expand existing retail stores. Outside of the original contribution of inventory, there are no intercompany sales. However, approximately 20% of Alixco’s purchases are handled by Smith’s purchasing agents.
Smith’s Home Hardware realized net income in 2001 of $40 million, which was apportioned 75% to Arizona and 25% to California. Smith’s filed a separate return in California for 2001. The California Franchise Tax Board has audited Smith’s Home Hardware and concluded that Smith’s and Alixco should be members of a unitary group filing a combined California tax return. The auditor added the Alixco net business income into the combined return, resulting in a California tax increase of $300,000.
Why Work with Us
Top Quality and Well-Researched Papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional and Experienced Academic Writers
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
Free Unlimited Revisions
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.
Prompt Delivery and 100% Money-Back-Guarantee
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & Confidential
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admission Essays & Business Writing Help
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.