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. 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.  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, the apportioned income to state A would be:
($200,000 ÷ 2) × (0.5 + 0.5 + (0.5 × 0.4)) = $60,000

Using a formula with a double-weighted sales factor, the apportioned income to state A would be:
($200,000 ÷ 2) × (0.5 × 2 + (0.5 × 0.4)) = $76,100

The difference between the two is $76,100 - $60,000 = $16,100. Therefore, the correct answer is (D).

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