Parent Corporation Owns All of the Stock of Junior Corporation

question 161

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

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Definitions:

Federal Law

Laws enacted by the national government of a country, which apply across the entire nation, superseding state laws in areas of conflict.

Physically Destroying

The act of causing physical damage to something to the point that it loses its value, functionality, or identity.

Writing Requirement

Writing requirement refers to the legal stipulation that certain contracts or agreements must be in written form to be legally enforceable.

Brain-Death Standard

The medical and legal criteria used to declare a person legally dead based on the irreversible cessation of all brain activity.