Question

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?

how much longer time do you need?

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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