Bert Corporation, a calendar-year taxpayer, owns property in States M and O. Both M and O require that the average value of assets be included in the property factor. M requires that the property be valued at its historical cost, and O requires that the property be included in the property factor at its net depreciated book value. Bert's State M property factor is:

Question

Bert Corporation, a calendar-year taxpayer, owns property in States M and O. Both M and O require that the average value of assets be included in the property factor. M requires that the property be valued at its historical cost, and O requires that the property be included in the property factor at its net depreciated book value.  Bert's State M property factor is:

Quizplus · Accepted Answer

To calculate the property factor for State M, we need to determine the average value of assets in that state. Since State M requires the historical cost method, we must use the historical cost of the property in State M. Bert Corporation's historical cost of property for State M is $450,000 ($300,000 + $150,000).

Next, we need to determine the total average value of assets for Bert Corporation. From the information given, we know that Bert Corporation owns property in two states, so we need to calculate the total value of property for both states. Using the net depreciated book value method required by State O, we can calculate the value of Bert Corporation's property in State O as $510,000 (($600,000 + $300,000) ÷ 2).

Adding the historical cost of property in State M and the net depreciated book value of property in State O gives us a total average value of assets for Bert Corporation of $960,000 (($450,000 + $510,000) ÷ 2).

Finally, we can calculate the property factor for State M by dividing the historical cost of property in State M by the total average value of assets for Bert Corporation. This gives us a property factor of 64.9% ($450,000 ÷ $960,000). Therefore, the correct answer is choice C.

Bert Corporation, a Calendar-Year Taxpayer, Owns Property in States M