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

Question

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

Quizplus · Accepted Answer

Since Kurt Corporation has nexus for income tax purposes in both states and sells its products in both states, it needs to apportion its taxable income between X and Z. 
State Z utilizes an equally weighted three-factor apportionment formula, which takes into account property, payroll, and sales within the state. 
We do not have information on Kurt Corporation's property or payroll in each state, but we do know that it had sales of $900,000 in both states combined. Therefore, we can apportion the income based on sales. 
Since Z equally weights all three factors, it will apportion 50% of Kurt's taxable income to the state based on sales. 
Thus, $900,000 x 50% = $450,000 of Kurt's taxable income is apportioned to State Z. 
Therefore, the correct answer is B) $150,000.

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