José Corporation realized $900,000 taxable income from the sales of its products in States X and Z. José's activities in both states establish nexus for income tax purposes. José's sales, payroll, and property among the states include the following: $$\begin{array} { l r r r }
& \text { State X } & \text { State Z } & \text { T otals } \
\text { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \
\text { Property } & 500,000 & - 0 - & 500,000 \
\text { Payroll } & 2,000,000 & - 0 - & 2,000,000
\end{array}$$ X utilizes an equally weighted three-factor apportionment formula. How much of José's taxable income is apportioned to X?

Question

José Corporation realized $900,000 taxable income from the sales of its products in States X and Z. José's activities in both states establish nexus for income tax purposes. José's sales, payroll, and property among the states include the following: $$\begin{array} { l r r r } 
& \text { State X } & \text { State Z } & \text { T otals } \
\text { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \
\text { Property } & 500,000 & - 0 - & 500,000 \
\text { Payroll } & 2,000,000 & - 0 - & 2,000,000
\end{array}$$ X utilizes an equally weighted three-factor apportionment formula. How much of José's taxable income is apportioned to X?

Quizplus · Accepted Answer

The apportionment formula for State X is equally weighted among sales, property, and payroll. The apportionment percentage for each factor is calculated as follows: - Sales: $1,500,000 / $2,500,000 = 0.6 or 60%- Property: $500,000 / $500,000 = 1 or 100%- Payroll: $2,000,000 / $2,000,000 = 1 or 100%The average of these percentages is (60% + 100% + 100%) / 3 = 260% / 3 = 86.67%.Therefore, the amount of José's taxable income apportioned to X is 86.67% of $900,000 = $780,000.

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