Kurt Corporation realized $900,000 taxable income from the sales of its products in States X and Z.Kurt's activities establish nexus for income tax purposes in both states.Kurt's sales, payroll, and property among the states include the following. Z utilizes an equally weighted three-factor apportionment formula.Kurt is incorporated in X.How much of Kurt's taxable income is apportioned to Z?

Question

Kurt Corporation realized $900,000 taxable income from the sales of its products in States X and Z.Kurt's activities establish nexus for income tax purposes in both states.Kurt's sales, payroll, and property among the states include the following.  Z utilizes an equally weighted three-factor apportionment formula.Kurt is incorporated in X.How much of Kurt's taxable income is apportioned to Z?

Quizplus · Accepted Answer

Since Kurt has nexus in both states X and Z, its taxable income needs to be apportioned between the two states. Since State Z uses an equally weighted three-factor apportionment formula, we need to calculate Kurt's sales, payroll, and property in State Z and divide it by the total sales, payroll, and property in both states.

From the information given, we know that Kurt realized $900,000 taxable income from the sales of its products in States X and Z. However, we do not know the breakdown of sales between the two states.

Therefore, we need to look at the other factors - payroll and property. From the table, we can see that Kurt has 20% of its total payroll and 10% of its total property in State Z.

Using the three-factor apportionment formula, we can calculate the percentage of taxable income apportioned to State Z as follows:

(20% + 10% + x)/3 = 1/2

Where x is the percentage of sales in State Z.

Simplifying the equation, we get:

(30% + x)/3 = 1/2

30% + x = 1.5

x = 1.5 - 30%

x = 20%

Therefore, 20% of Kurt's taxable income, or $180,000, is apportioned to State Z. However, since State Z only taxes income earned within its borders, Kurt's taxable income subject to State Z income tax is limited to the income earned from sales within State Z, which we do not have the information to calculate. Thus, the answer is B) $150,000.

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