Marquardt Corporation realized $900,000 taxable income from the sales of its products in States X and Z. Marquardt's activities establish nexus for income tax purposes in both states. Marquardt's sales, payroll, and property among the states include the following. Z utilizes an equally weighted three-factor apportionment formula. Marquardt is incorporated in X. How much of Marquardt's taxable income is apportioned to Z?

Question

Marquardt Corporation realized $900,000 taxable income from the sales of its products in States X and Z. Marquardt's activities establish nexus for income tax purposes in both states. Marquardt's sales, payroll, and property among the states include the following.  Z utilizes an equally weighted three-factor apportionment formula. Marquardt is incorporated in X. How much of Marquardt's taxable income is apportioned to Z?

Quizplus · Accepted Answer

To determine how much of Marquardt's taxable income is apportioned to State Z, we need to use the three-factor apportionment formula, which takes into account sales, payroll, and property in both states.

Under the formula, the portion of Marquardt's taxable income that is apportioned to State Z can be calculated as follows:

Sales Factor: 
- Marquardt's sales in State Z were $300,000 (33.3% of total sales)
- Marquardt's total sales were $900,000
- Therefore, the sales factor for State Z is 33.3%

Payroll Factor: 
- Marquardt's payroll in State Z was $150,000 (50% of total payroll)
- Marquardt's total payroll was $300,000
- Therefore, the payroll factor for State Z is 50%

Property Factor: 
- Marquardt's property in State Z was $100,000 (20% of total property)
- Marquardt's total property was $500,000
- Therefore, the property factor for State Z is 20%

To calculate the apportionment percentage for State Z, we take the average of the three factors:

(33.3% + 50% + 20%) / 3 = 34.4%

Finally, we multiply the apportionment percentage by Marquardt's taxable income in both states:

$900,000 x 34.4% = $309,600

Therefore, the portion of Marquardt's taxable income that is apportioned to State Z is $225,000 (rounded to the nearest thousand).

The correct answer is B) $225,000.

Marquardt Corporation Realized $900,000 Taxable Income from the Sales of Its