Parent Corporation Owns All of the Stock of Junior Corporation

question 56

Multiple Choice

Parent Corporation owns all of the stock of Junior Corporation, a Delaware passive investment company. Parent operates strictly in nonunitary State B, which levies a 9% income tax. This year, Junior earned $200,000 of portfolio interest income and paid a $150,000 dividend to Parent. In which state(s) will the interest income create an income tax liability?

• A) Only in B.
• B) Only in Delaware.
• C) In neither state.
• D) In both B and Delaware, according to the apportionment formulas of each.

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Definitions:

Unbalanced

Lacking equilibrium or stability in terms of emotional state, workload, resource distribution, or other areas affecting individuals or groups.

Balance Theory

A psychological theory suggesting that individuals strive for consistency among their beliefs, attitudes, and sentiments in interpersonal relationships.

Heider

Refers to Fritz Heider, an Austrian psychologist known for his contributions to attribution theory and balance theory within social psychology.

Balanced State

A condition of mental or emotional stability where stresses and forces are well managed or in equilibrium.