Question

Mr. JK, a U.S. citizen and resident of Vermont, owns 100 percent of the stock of JK Services, which is incorporated under Vermont law and conducts business in four counties in the state. JK Services owns 100 percent of the stock of JK Realty, which is incorporated under Massachusetts law and conducts business in Boston.

a. How many taxpayers are identified in the given statement of facts?

b. Identify the governments with jurisdiction to tax each of these taxpayers.

Answer 1

Answer a:

There are 3 distinct legal entities in the given case and thus 3 distinct taxpayers. These are Mr JK, JK services and JK realty.

This is because a company incorporated under law has a separate identity from it's owner and is considered a separate legal entity for every purpose including taxation.

Answer b:

Mr JK shall be taxed by the government of Vermont as he is a resident of Vermont.

JK services shall be taxed by the government of Vermont as it is incorporated in the state and conducts it's business within the state.

JK realty shall be taxed by the government of Boston as it conducts it's business in the state of Boston and will this be considered a resident of Boston.