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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