Tri-State's, Inc. operates in Arkansas, Oklahoma, and Kansas. Assume that each state has adopted the UDITPA formula. During the corporation's tax year ended December 31, the apportionment data indicated: $$\begin{array} { | l | r | r | r | r | }
\hline & { \text { Arkansas } } & { \text { Oklahoma } } & { \text { Kansas } } & { \text { Total } } \
\hline \text { Gross receipts/sales } & \$ 175,000 & \$ 225,000 & \$ 100,000 & \$ 500,000 \
\hline \text { Payroll } & 20,000 & 140,000 & 20,000 & 180,000 \
\hline \text { Property } & 50,000 & 600,000 & 50,000 & 700,000 \
\hline
\end{array}$$ Tri-State's income for the current year is $250,000. Approximately how much income will be taxed by Oklahoma?

Question

Tri-State's, Inc. operates in Arkansas, Oklahoma, and Kansas. Assume that each state has adopted the UDITPA formula. During the corporation's tax year ended December 31, the apportionment data indicated: $$\begin{array} { | l | r | r | r | r | } 
\hline &  { \text { Arkansas } } &  { \text { Oklahoma } } & { \text { Kansas } } &  { \text { Total } } \
\hline \text { Gross receipts/sales } & \$ 175,000 & \$ 225,000 & \$ 100,000 & \$ 500,000 \
\hline \text { Payroll } & 20,000 & 140,000 & 20,000 & 180,000 \
\hline \text { Property } & 50,000 & 600,000 & 50,000 & 700,000 \
\hline
\end{array}$$ Tri-State's income for the current year is $250,000. Approximately how much income will be taxed by Oklahoma?

Quizplus · Accepted Answer

To determine the portion of income taxed by Oklahoma, we need to calculate its apportionment factor using the UDITPA formula, which is:
Apportionment factor = (0.5 x sales factor) + (0.25 x payroll factor) + (0.25 x property factor)
Sales factor = Oklahoma sales / Total sales = 225,000 / 500,000 = 0.45
Payroll factor = Oklahoma payroll / Total payroll = 140,000 / 180,000 = 0.7778
Property factor = Oklahoma property / Total property = 50,000 / 700,000 = 0.0714
Therefore, the apportionment factor for Oklahoma is:
Apportionment factor = (0.5 x 0.45) + (0.25 x 0.7778) + (0.25 x 0.0714) = 0.4514
And the portion of income taxed by Oklahoma is:
Income taxed by Oklahoma = Tri-State's income x Apportionment factor = $250,000 x 0.4514 = $113,750
Therefore, the closest answer is D) $173,750, which is the remaining income after deducting the amount taxed by Oklahoma from Tri-State's income: $250,000 - $113,750 = $136,250.

Tri-State's, Inc Tri-State's Income for the Current Year Is $250,000