Question

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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		$	1,340	$	440	$	530	$	555
Business income			54,500		30,500		14,500		15,600
Sales:	State X		78,200		16,600		15,400		13,600
	State Y				61,250		5,900
	State Z				28,100		34,750		16,300
	State A		23,300
	State B		19,000						12,700
Property:	State X		63,000		25,700				14,700
	State Y				84,750
	State Z						33,250		31,250
	State A		67,000
Payroll:	State X		12,000		14,000
	State Y				60,250
	State Z						3,350		18,600
	State A								18,100

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

(a) Calculation of apportionment factor of State X

Particulars	Sharon Inc	Carol Corp	Josey Corp	Janice Corp
Sales in State X ($)	78200	16600	15400	13600
Total Sales ($)	120500	105950	56050	42600
Proportion of sales (Sales of X/Total Sales)	0.649	0.157	NA (Refer to Note below)	0.32
Property in State X($)	63000	25700	0	14700
Total Property ($)	130000	110450	33250	45950
Proportion of Property (Property of X/Total Property)	0.484	0.232	NA (Refer to Note below)	0.32
Payroll in State X($)	12000	14000	0	0
Total Payroll ($)	12000	74250	3350	36700
Proportion of Payroll (Payroll of X/Total Payroll)	1	0.188	NA (Refer to Note below)	0

Note Now for the factor apportionment we are not going to consider Josey Corp into account as it has no property in payroll in State X. And hence there would no further calculations made with respect to apportionment of business income, taxable income and tax liabilty.

Weighted apportionment for Sharon Inc = (0.649+0.484+1)/3 = 0.711

Carol Corp = (0.157+0.232+0.188)/3 = 0.192

Janice Corp = (0.32+0.32+0) /3 = 0.213

(B) Business Income

Particulars	Sharon Inc	Carol Corp	Janice Corp
Business Income ($)	54500	30500	15600
Apportionment factor	0.711	0.192	0.213
Business Income apportioned to State X in $ (Income * Apportionment factor)	38750	5856	3323

Total Business Income apportioned to state X = $38750+$5856+$3323 = $47929

(C) Taxable Income for State X

Particulars	Sharon Inc	Carol Corp	Janice Corp
(A)Apportioned Business Income ($)	38750	5856	3323
(B)Dividend Income ($)	1340	440	555
(C)Total Taxable Income (A+B)	40090	6296	3878

.(D) Tax liabilty

Total taxable Income = $40090+ $6296 + $3878 = $50264

Tax rate = 15%

Tax liabilty = $50264 * 15% = $7540