José Corporation realized $600,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales,payroll,and property among the states include the following. X utilizes an equally weighted three-factor apportionment formula.How much of José's taxable income is apportioned to X?

Question

José Corporation realized $600,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales,payroll,and property among the states include the following.  X utilizes an equally weighted three-factor apportionment formula.How much of José's taxable income is apportioned to X?

Quizplus · Accepted Answer

To calculate the apportioned taxable income for X, we need to use the equally weighted three-factor apportionment formula, which takes into account sales, payroll, and property factors.

Sales Factor:

José Corporation made $600,000 in taxable income, out of which $300,000 came from sales in State X. Therefore, the sales factor for State X is:

($300,000 sales in State X / $600,000 total sales) x 100 = 50%

Payroll Factor:

José Corporation had $80,000 in total payroll, out of which $20,000 was paid to employees in State X. Therefore, the payroll factor for State X is:

($20,000 payroll in State X / $80,000 total payroll) x 100 = 25%

Property Factor:

José Corporation had $400,000 in total property, out of which $200,000 was located in State X. Therefore, the property factor for State X is:

($200,000 property value in State X / $400,000 total property value) x 100 = 50%

Weighted Average:

Now, we need to take the weighted average of the sales, payroll, and property factors to determine the apportionment percentage for State X. Since X utilizes an equally weighted three-factor apportionment formula, we will assign a weight of 1/3 to each factor.

Apportionment percentage for X = [(Sales factor x 1/3) + (Payroll factor x 1/3) + (Property factor x 1/3)]

= [(50% x 1/3) + (25% x 1/3) + (50% x 1/3)]

= 41.67%

Apportioned taxable income for X = Apportionment percentage for X x Total taxable income

= 41.67% x $600,000 = $250,002

Therefore, the correct answer is C) $520,200.

José Corporation Realized $600,000 Taxable Income from the Sales of Its