Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income,and its sales and payroll activity and average property owned in each of the states is as follows. How much more (less)of Boot's income is subject to A income tax if,instead of using an equally-weighted three-factor apportionment formula,A uses a formula with a double-weighted sales factor?

Question

Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income,and its sales and payroll activity and average property owned in each of the states is as follows.  How much more (less)of Boot's income is subject to A income tax if,instead of using an equally-weighted three-factor apportionment formula,A uses a formula with a double-weighted sales factor?

Quizplus · Accepted Answer

Using the equally-weighted three-factor apportionment formula, Boot's income apportioned to State A is:

($200,000 x (50% + 50% + 50%)) ÷ 3 = $100,000

Using a double-weighted sales factor formula, the sales factor is assigned a weight of 2 and the property and payroll factors are each assigned a weight of 1. Boot's income apportioned to State A is:

($200,000 x ((($140,000 ÷ $200,000) x 2) + (($40,000 ÷ $200,000) x 1) + (($20,000 ÷ $200,000) x 1))) ÷ 4 = $83,900

The difference in income apportioned to State A between the two formulas is:

$100,000 - $83,900 = $16,100 less.

Therefore, the answer is (D) ($16,100).

Boot Corporation Is Subject to Income Tax in States a and B.Boot's