Question

Sharon Inc. is headquartered in State X and owns 100 percent of Carol Corp., Josey Corp., and Janice Corp., which form a single unitary group. Assume sales operations are within the solicitation bounds of Public Law 86-272. Each of the corporations has operations in the following states:

Domicile State		Sharon Inc. State X (throwback)		Carol Corp. State Y (throwback)		Josey Corp. State Z (nonthrowback)		Janice Corp. State Z (nonthrowback)
Dividend income		$	1,220	$	565	$	345	$	685
Business income			52,500		42,250		17,200		14,600
Sales:	State X		78,500		13,900		15,100		12,600
	State Y				51,250		7,700
	State Z				22,300		23,750		13,900
	State A		21,600
	State B		13,300						11,800
Property:	State X		66,000		30,000				16,300
	State Y				100,000
	State Z						35,000		28,250
	State A		57,000
Payroll:	State X		17,400		15,800
	State Y				56,750
	State Z						3,550		11,200
	State A								12,800

Compute the following for State X assuming a tax rate of 15 percent. (Use an equally weighted three-factor apportionment. Round all apportionment factors to 4 decimal places. Round other answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

a. Calculate the State X apportionment factor for Sharon Inc., Carol Corp., Josey Corp., and Janice Corp.
b. Calculate the business income apportioned to State X.
c. Calculate the taxable income for State X for each company.
d. Determine the tax liability for State X for the entire group.

Answer 1

Answers:

(a). Calculate the State X apportionment factor for Sharon Inc., Carol Corp., Josey Corp., and Janice Corp.

Apportionment Factor of State X for Sharon Inc = 0.7429

Apportionment Factor of State X for Carol Corp = 0.2025

Apportionment Factor of State X for Janice Corp = 0.2316

(b). Calculate the business income apportioned to State X.

Business Income apportionment of State X for Sharon Inc = 39002

Business Income apportionment of State X for Carol Corp = 8556

Business Income apportionment of State X for Janice Corp = 3381

(c). Calculate the taxable income for State X for each company.

Taxable Income of State X for Sharon Inc = 40,222

Taxable Income of State X for Carol Corp = 8,556

Taxable Income of State X for Janice Corp = 3,381

(d). Determine the tax liability for State X for the entire group.

Total Taxable liability of State X for entire group = 7,824

Calculation

Josey doesn't have property and payroll in State X, so no apportionment is calculated.

		Sharon Inc.	Carol Corp.	Josey Corp.	Janice Corp.
Sales:	State X	78,500	13,900	15,100	12,600
	Total	113,400	87,450	46,550	38,300
	Proportion	0.7	0.16		0.33
Property:	State X	66,000	30,000	0	16,300
	Total	123,000	130,000	35,000	44,550
	Proportion	0.5	0.23		0.37
Payroll:	State X	17,400	15,800	0	0
	Total	17,400	72,550	3,550	24,000
	Proportion	1	0.22		0

Josey is not included for the calculation due to no apportionment.

There might be rounding differences due to the decimal places in Approportion Factor

	Sharon Inc.	Carol Corp.	Janice Corp.
Sales:	0.7	0.16	0.33
Property:	0.5	0.23	0.37
Payroll:	1	0.22	0
Total (a)	2.2	0.61	0.69
Factor (b)	3	3	3
Approportion Factor (c)= (a)/(b)	0.7429	0.2025	0.2316
Total Business Income (d)	52,500	42,250	14,600
Approportion Business Income (e) = (c) * (d)	39002	8556	3381
Allocated Income (f)	1,220	0	0
Taxable Income (g) = (e) + (f)	40,222	8,556	3,381

Total Taxable Income = 40,222 + 8,556 + 3,381 = 52,159

Tax Rate = 15%

Tax on State Liability = 52,159 * 15% = 7,824

So, Total Tax Liability for entire group = 7,824