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, its taxable income needs to be apportioned based on the sales, payroll, and property in both states. The question states that Z uses an equally weighted three-factor apportionment formula. Therefore, one-third of Kurt's taxable income will be apportioned to Z since sales, payroll, and property are equally weighted factors.

One-third of $900,000 is $300,000. However, since Kurt is incorporated in State X, State X has the right to tax on all of Kurt's income. Therefore, Kurt will have to pay taxes on $300,000 to State Z, but State X will tax on the entire taxable income of $900,000.

Therefore, Kurt's taxable income apportioned to State Z = $300,000/3 = $100,000, which is closest to option B - $150,000.

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