Chipper Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z.Chipper's activities establish nexus for income tax purposes only in Z,the state of its incorporation.Chipper's sales,payroll,and property among the states include the following. State X State Z Totals Sales $1,000,000 $2,000,000 $3,000,000 Property 200,000 2,300,000 2,500,000 Payroll 100,000 1,900,000 2,000,000 X utilizes a sales-only factor in its three-factor apportionment formula.How much of Chipper's taxable income is apportioned to X?

Question

Chipper Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z.Chipper's activities establish nexus for income tax purposes only in Z,the state of its incorporation.Chipper's sales,payroll,and property among the states include the following. State X State Z Totals Sales $1,000,000 $2,000,000 $3,000,000 Property 200,000 2,300,000 2,500,000 Payroll 100,000 1,900,000 2,000,000 ​ X utilizes a sales-only factor in its three-factor apportionment formula.How much of Chipper's taxable income is apportioned to X?

Quizplus · Accepted Answer

State X only utilizes a sales-only factor in its three-factor apportionment formula. Therefore, only sales are considered for apportioning taxable income to State X. Chipper Corporation generated $1,000,000 taxable income from the sales of its products. However, all of its sales in State X were $1,000,000, which is only one-third of its total sales. Therefore, only one-third of the taxable income is apportioned to State X, which is $333,333. However, since Chipper's activities only establish nexus for income tax purposes in State Z, it will not owe any income tax to State X.

Chipper Corporation Realized $1,000,000 Taxable Income from the Sales of Its