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: $$\begin{array} { l c c c }
& \text { State } X & \text { State Z } & \text { Totals } \
\text { Sales } & \$ 1,000,000 & \$ 3,000,000 & \$ 4,000,000 \
\text { Property } & 2,000,000 & - 0 - & 2,000,000 \
\text { Payroll } & 1,000,000 & - 0 - & 1,000,000
\end{array}$$ 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: $$\begin{array} { l c c c } 
& \text { State } X & \text { State Z } & \text { Totals } \
\text { Sales } & \$ 1,000,000 & \$ 3,000,000 & \$ 4,000,000 \
\text { Property } & 2,000,000 & - 0 - & 2,000,000 \
\text { Payroll } & 1,000,000 & - 0 - & 1,000,000
\end{array}$$ 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 calculate the income apportioned to State Z, we use the equally weighted three-factor apportionment formula, which considers sales, property, and payroll. For State Z, the sales factor is $3,000,000 / $4,000,000 = 0.75, the property factor is $0 / $2,000,000 = 0, and the payroll factor is $0 / $1,000,000 = 0. The average of these three factors is (0.75 + 0 + 0) / 3 = 0.25. Therefore, 25% of Marquardt's taxable income is apportioned to State Z, which is 0.25 * $900,000 = $225,000.

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