Question

Legends Corporation owns and operates two manufacturing facilities, one in State A and the other in State B. Due to a temporary decline in sales, Legend has rented 25% of its State A facility to an unaffiliated corporation. Legend generated $200,000 net rent income and $1,400,000 income from manufacturing. Both states classify the rent income as allocable (nonapportionable) income. By applying the statues of each state, Legends determines that its apportionment factors are .70 for A and .30 fo B.

How much income is subject to tax in:

1. State A?

2. State B?

Answer 1

Taxable Income	1600000	=1400000+200000
Less: Allocable Income	200000
Apportionable Income	1400000
X Apportionment Factor	0.70
Income Apportioned to State A	980000
Plus: Income Allocated to State A	0
Income Subject to Tax in State A	980000
Taxable Income	1600000	=1400000+200000
Less: Allocable Income	200000
Apportionable Income	1400000
X Apportionment Factor	0.30
Income Apportioned to State B	420000
Plus: Income Allocated to State B	200000
Income Subject to Tax in State B	620000