Question

In general, income for corporation business tax purposes is divided into two categories: business income and...

In general, income for corporation business tax purposes is divided into two categories: business income and nonbusiness income. Business income is apportioned to a state by use of a formula while nonbusiness income is allocated to a particular state. Business income includes income from transactions and activity in the regular course of a taxpayer's trade or business. Nonbusiness income is all income other than business income (interest, dividends, capital gains).  (Some states apportion all income).

Molly Corporation realized $1.5 million of taxable income from the sales of its service products in States A and B. Both states employ a three-factor apportionment formula that equally weighs sales, property, and payroll. Molly Corporation's gross sales, property and payroll attributable the states is as follows:

State A State B Totals

Gross sales $2,000,000 $2,000,000 $4,000,000

Property $2,500,000 0 $2,500,000

Payroll $1,500,000 0 $1,500,000

Income tax rate 10% 5%

Apportionment of Taxable Income to State A

Sales Factor $2,000,000/$4,000,000 = 50%

Property Factor $2,500,000/$2,500,000 = 100%

Payroll Factor $1,500,000/$1,500,000 = 100%

Sum of Apportionment Factors = 250% /3 = 83.3%

Taxable Income Apportioned to State A = 83.3% x $1,500,000 = $1,249,500

Tax Rate State A 10%

Tax Liability, State A $124,950

Would the tax liability be reduced if State A utilized a single factor apportionment formula only (no payroll or property factors)? If yes, why would a state use this type of apportionment?   Why is the current trend among states to use single factor market based sourcing for services?

Homework Answers

Answer #1

Answer :-

  • On the off chance that the express An utilization single division recipe, the assessment risk is diminished to half as the business distribution in express An is just half.
  • There has been a move from customary expense of performance(COP) to showcase based sourcing utilizing factor allocation to draw in organizations inside the state.
  • A solitary factor division conspire dependent on deals ,advertise based sourcing urges organizations to find their workplaces, property, gear, employees,and all other significant resources inside the purview.
  • The essential figure taken thought is the goal of the administration revenue,rather than the area where the income was earned.
  • In this manner showcase based sourcing enables states to assess out-of-state specialist organizations that include clients inside their separate state.
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Subject: Business Tax Brood Corporation realized $1.5 million of taxable income from the sales of its...
Subject: Business Tax Brood Corporation realized $1.5 million of taxable income from the sales of its products in States A and B. Both states employ a three-factor apportionment formula that equally weights sales, property, and payroll. Brood’s gross sales, payroll, and property attributable to or located in the states are shown below. Based on this data, determine the tax liability for State A and State B, and the total effective tax rate. State A State B Totals Gross Sales $2,000,000...
Subject: Business Tax Brood Corporation realized $1.5 million of taxable income from the sales of its...
Subject: Business Tax Brood Corporation realized $1.5 million of taxable income from the sales of its products in States A and B. Both states employ a three-factor apportionment formula that equally weights sales, property, and payroll. Brood’s gross sales, payroll, and property attributable to or located in the states are shown below. Based on this data, determine the tax liability for State A and State B, and the total effective tax rate. State A State B Totals Gross Sales $2,000,000...
True Corporation, a wholly owned subsidiary of Trumaine Corporation, generated a $400,000 taxable loss in its...
True Corporation, a wholly owned subsidiary of Trumaine Corporation, generated a $400,000 taxable loss in its first year of operations. True's activities and sales are restricted to State A, which imposes an 8% income tax. In the same year, Trumaine's taxable income is $1,000,000. Trumaine's activities and sales are restricted to State B, which imposes an 11% income tax. Both states use a three-factor apportionment formula that equally weights sales, payroll, and property, and both require a unitary group to...
Palmetto Corporation realized $300,000 of taxable income from the sales of its products in States A...
Palmetto Corporation realized $300,000 of taxable income from the sales of its products in States A and B. Palmetto's activities in both states establish nexus for income tax purposes. Palmetto's sales, payroll, and property in the states include the following: State A State B Total Sales $540,000 $260,000 $800,000 Property $155,000 $0 $155,000 Payroll $285,000 $0 $285,000 State B uses a sales-factor-only apportionment formula. In your computations, round any division to three decimal places before converting to a percentage and...
Egret Corporation generated $600,000 of state taxable income from selling its product in California and Oregon....
Egret Corporation generated $600,000 of state taxable income from selling its product in California and Oregon. For the taxable year, the corporation’s activities within the two states were as follows: California Oregon Total Sales $750,000 $250,000 $1,000,000 Property $300,000 $0 $300,000 Payroll $400,000 $600,000 $1,000,000 Egret has determined that it has income tax nexus in both California and Oregon. California utilizes a three-factor apportionment formula that equally weights sales, property, and payroll. Oregon uses a three-factor formula with a double-weighted...
Macbeth Corporation conducts business in States X ,Y and Z. Macbeth’s $1,000,000 of federal taxable income...
Macbeth Corporation conducts business in States X ,Y and Z. Macbeth’s $1,000,000 of federal taxable income consists of $800,000 apportionable income and $ 200,000 allocable income generated from transactions conducted in State Y. Macbeth’s sales, property, and payroll are evenly divided among the three states. States X and Y employ a three-equal factors appointment formula. State Z also has a three-equal factors appointment but double weighs the sales factor. How much of Macbeth’s income is taxable in: State X State...
Sharon Inc. is headquartered in State X and owns 100 percent of Carol Corp., Josey Corp.,...
Sharon Inc. is headquartered in State X and owns 100 percent of Carol Corp., Josey Corp., and Janice Corp., which form a single unitary group. Assume sales operations are within the solicitation bounds of Public Law 86-272. Each of the corporations has operations in the following states: Domicile State Sharon Inc. State X (throwback) Carol Corp. State Y (throwback) Josey Corp. State Z (nonthrowback) Janice Corp. State Z (nonthrowback) Dividend income $ 1,460 $ 295 $ 610 $ 520 Business...
Roger Corporation operates in two states, as indicated below. This year's operations generated $400,000 of apportionable...
Roger Corporation operates in two states, as indicated below. This year's operations generated $400,000 of apportionable income. State A State B Total Sales $800,000 $200,000 $1,000,000 Property 300,000 300,000 600,000 Payroll 200,000 50,000 250,000 Compute Roger's State A taxable income, assuming that State A apportions income based on the following scenarios. Round any percentages in your computations to two decimal places. Round your final answers to the nearest dollar. Roger's State A Taxable Income a. Three-factor formula, equally weighted $...
M Corporation reported 2019 book net income of $185,000. The following items were included in book...
M Corporation reported 2019 book net income of $185,000. The following items were included in book income for 2018: State A income tax expense $ 15,000 State B income tax expense $ 5,000 Federal income tax expense $49,000 Book depreciation expense $ 18,000 Municipal bond interest income $ 10,000 US government obligation interest income $ 12,000 Dividends received from 5% owned US co. $ 8,000 Separately, M Corporation computed federal tax depreciation of $26,000. A) Based on the above, compute...
A corporation operates in seven states. Its Taxable Income amounts to $800,000, and other relevant information...
A corporation operates in seven states. Its Taxable Income amounts to $800,000, and other relevant information is:                                                                  Amounts attributable                                                                               ___to State 1___                                                                                              TOTALS__           SALES $ 9,000,000 $20,000,000            PROPERTY VALUES $ 1,500,000 $ 5,000,000            COMPENSATION                                                    $ 1,890,000   $ 9,000,000 State 1 uses the weighted average of 3 factors to allocate multi state income. How much income will be taxed by State 1? (round to nearest percent) a.   $ 256,000 b.   $ 266,667                         c.   $...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT