Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income,and its sales and payroll activity and average property owned in each of the states is as follows. State A State B Totals Sales $200,000 $600,000 $800,000 Payroll 100,000 50,000 150,000 Property 200,000 50,000 250,000 How much more (less) of Boot's income is subject to A income tax if,instead of using an equally-weighted three-factor apportionment formula,A uses a formula with a double-weighted sales factor?

Question

Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income,and its sales and payroll activity and average property owned in each of the states is as follows. State A State B Totals Sales $200,000 $600,000 $800,000 Payroll 100,000 50,000 150,000 Property 200,000 50,000 250,000 ​ How much more (less) of Boot's income is subject to A income tax if,instead of using an equally-weighted three-factor apportionment formula,A uses a formula with a double-weighted sales factor?

Quizplus · Accepted Answer

Using an equally-weighted three-factor apportionment formula, Boot's income apportioned to State A would be:

Sales factor: (200,000/800,000) x 1/3 = 0.0833
Payroll factor: (150,000/300,000) x 1/3 = 0.1667
Property factor: (250,000/450,000) x 1/3 = 0.1852

Apportionment factor for State A = 0.0833 + 0.1667 + 0.1852 = 0.4352

Boot's apportioned income subject to State A tax = $200,000 x 0.4352 = $87,040

Using a formula with a double-weighted sales factor, Boot's income apportioned to State A would be:

Sales factor: (200,000/800,000) x 2/3 = 0.1667
Payroll factor: (150,000/300,000) x 1/3 = 0.1667
Property factor: (250,000/450,000) x 1/3 = 0.1852

Apportionment factor for State A = 0.1667 + 0.1667 + 0.1852 = 0.5186

Boot's apportioned income subject to State A tax = $200,000 x 0.5186 = $103,720

The difference in income subject to State A tax between the two formulas is:

$103,720 - $87,040 = $16,680

Thus, the answer is D) ($16,100), as the question asks for the amount of more (less) income subject to State A tax.

Boot Corporation Is Subject to Income Tax in States a and B.Boot's