Korn, Co. was incorporated in Delaware. It has production, distribution, and sales facilities in Kansas and Nebraska. All of Korn's customers reside in Kansas or Nebraska. Assume that both states use the UDITPA formula for apportionment of income. The corporation is investing in new equipment that cost $900,000. The equipment could be used in either the Kansas or Nebraska production facilities. Assume that Kansas' corporate income tax rate is 7% and Nebraska's is 8.5%. Should the equipment be placed in Kansas or Nebraska to minimize Korn's state income tax?

Question

Quizplus · Accepted Answer

Placing the equipment in Kansas would minimize Korn's state income tax due to Kansas' lower corporate income tax rate of 7% compared to Nebraska's 8.5%. The Uniform Division of Income for Tax Purposes Act (UDITPA) apportions income based on factors such as property, payroll, and sales. The location of the new equipment would affect the property factor, potentially altering the apportionment of income to states with different tax rates.

Korn, Co Was Incorporated in Delaware