Question

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 use rounded amounts in subsequent computations. If required, round your final answer to the nearest dollar. How much of Palmetto's taxable income is apportioned to State B?

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Homework Answers

Answer #1

SOLUTION:-

Palmetto's Corporation income
$ 300,000
Palmetto's apportionment percentage
State A
Sales Factor = $540000/$800000
= 0.675
Payroll Factor = $285000/$285000
= 1
Property Factor = $155000/$155000
=1
Suppose if State A also uses only sales factor formula
Palmetto's apportionment percentage is
=67.5%
State B
Sales Factor = $260000/$800000
=32.5%
State B uses sales factor only apportionment formula
Palmetto's apportionment percentage is
=32.5%
Palmetto Corporation Taxable Income
State A= $300000*67.5%
=$ 202500
State B = $300000*32.5%
= $ 97500

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