Albany, Inc. does business in states C andD. State C uses an apportionment formula that double-weights the sales factor; state D apportions income using an equally-weighted three-factor formula. Albany's before tax income is $3,000,000, and its sales, payroll, and property factors are as follows. $$\begin{array} { | l | c | c | }
\hline & C & D \
\hline \text { Sales factor } & 50 \% & 50 \% \
\hline \text { Payroll factor } & 40 \% & 60 \% \
\hline \text { Property factor } & 20 \% & 80 \% \
\hline
\end{array}$$ Calculate Albany's income taxable in each state.

Question

Albany, Inc. does business in states C andD. State C uses an apportionment formula that double-weights the sales factor; state D apportions income using an equally-weighted three-factor formula. Albany's before tax income is $3,000,000, and its sales, payroll, and property factors are as follows. $$\begin{array} { | l | c | c | } 
\hline & C & D \
\hline \text { Sales factor } & 50 \% & 50 \% \
\hline \text { Payroll factor } & 40 \% & 60 \% \
\hline \text { Property factor } & 20 \% & 80 \% \
\hline
\end{array}$$ Calculate Albany's income taxable in each state.

Quizplus · Accepted Answer

For State C, we apply the double-weighted sales factor and obtain:
Sales factor = 50%, Double-weighted sales factor = 100%
Payroll factor = 40%
Property factor = 20%
Total apportionment factor = 100% + 40% + 20% = 160%
Apportionment percentage for State C = Double-weighted sales factor/total apportionment factor = 100%/160% = 62.5%
Income taxable in State C = Apportionment percentage for State C × Before tax income = 62.5% × $3,000,000 = $1,875,000
For State D, we apply the equally-weighted three-factor formula and obtain:
Total apportionment factor = 100% + 60% + 80% = 240%
Apportionment percentage for State D = 100%/240% = 41.67%
Income taxable in State D = Apportionment percentage for State D × Before tax income = 41.67%× $3,000,000 = $1,250,000
Therefore, the answer is D) State C, $1,200,000; State D, $1,900,000.

Albany, Inc Calculate Albany's Income Taxable in Each State