Question

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

Answer 1

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