The management of Nixon Company must decide between locating a new branch office in foreign Jurisdiction F or foreign Jurisdiction G. Regardless of location, the branch operation will use tangible property (plant and equipment) worth $11.2 million and should generate annual gross receipts of $2.6 million. Jurisdiction F imposes an annual property tax of 4 percent of the value of business property and a 15 percent gross receipts tax. Jurisdiction G imposes no property tax but imposes a 30 percent gross receipts tax. Required: a. Compute the tax costs of operating in both jurisdictions. b. Solely on the basis of these facts, should Nixon locate its new branch in Jurisdiction F or Jurisdiction G?

The management of Nixon Company must decide between locating a new branch office in foreign Jurisdiction F or foreign Jurisdiction G. Regardless of location, the branch operation will use tangible property (plant and equipment) worth $11.2 million and should generate annual gross receipts of $2.6 million. Jurisdiction F imposes an annual property tax of 4 percent of the value of business property and a 15 percent gross receipts tax. Jurisdiction G imposes no property tax but imposes a 30 percent gross receipts tax. Required: a. Compute the tax costs of operating in both jurisdictions. b. Solely on the basis of these facts, should Nixon locate its new branch in Jurisdiction F or Jurisdiction G?

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter17: Business Tax Credits And The Alternative Minimum Tax

Section: Chapter Questions

Problem 17P

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