Question

# 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.   \$ 360,000

d.   \$ 168,000

e.   \$ 240,000

Solution: \$256,000
Working:

State 1    Totals   % of share   Working
Sales   9,000,000   20,000,000   45%   900,000/ 20,000,000
Property Values   1,500,000   5,000,000   30%   1,500,000 / 5,000,000
Compensation   1,890,000   9,000,000   21%   1,890,000 / 9,000,000
12,390,000   34,000,000   96%

Weighted average = 96% / 3 = 32%
Sales = 800,000 * 32% = 256,000

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