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		$	1,700	$	475	$	385	$	660
Business income			58,200		34,250		17,800		17,300
Sales:	State X		76,000		19,000		17,900		15,400
	State Y				48,250		8,000
	State Z				26,800		35,750		10,100
	State A		19,500
	State B		16,800						19,500
Property:	State X		74,250		22,400				18,200
	State Y				87,750
	State Z						42,750		38,250
	State A		52,250
Payroll:	State X		16,600		12,600
	State Y				41,000
	State Z						6,000		10,700
	State A								18,500

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

Answer:

a.

	State X Apportionment factors
Sharon	0.7546
Carol	0.2135
Josey	0
Janice	0.2215

b.

Business Income

55,062

c.

	State X Taxable Income
Sharon	42,218
Carol	6,837
Josey	-
Janice	3,172

d.

Tax Liability

7,834

Calculation:

State X Apportionment factors

Here, we need to divide the sales X amount of Sharon Inc, Carol Corp, Josey Corp and Janice Corp with the total of sales, property and payroll.

For that we need to first prepare the table with the required data as below:

	Sharon Inc.	Carol Corp.	Josey Corp.	Janice Corp.
Sales X	76,000	19,000	17,900	15,400
Total	112,300	94,050	61,650	45,000
Property X	74,250	22,400	0	18,200
Total	126,500	110,150	42,750	56,450
Payroll X	16,600	12,600	0	0
Total	16,600	53,600	6,000	29,200

Next step is to divide the X share with the total amount calculated. Then, we get the percentage for sales, property and Payroll.

We are not calculating the Josey's apportionment for property or payroll as there is no property or payroll for her. Then, we need to add all the percentages then, divide with 3.

	Sharon Inc.	Carol Corp.	Janice Corp.
Sales	0.6768	0.2020	0.3422
Property	0.5870	0.2034	0.3224
Payroll	1.0000	0.2351	0.0000
Total (a)	2.2637	0.6405	0.6646
Apportionment Factor (a) / 3	0.7546	0.2135	0.2215

Business Income:

We then multiply business income of Sharon, Carol and Janice with apportionment factor to get the allocated income.

	Sharon Inc.	Carol Corp.	Janice Corp.
Business Income (a)	58,200	34,250	17,300
Apportionment Factor (b)	0.7546	0.2135	0.2215
Allocated Income (a) x (b)	43,918	7,312	3,832

Total business income apportioned to State X = 43,918 + 7,312 + 3,832 = 55,062

State X Taxable Income:

To calculate the taxable income we need to subtract the dividends from the allocated income, to get the taxable income

	Sharon Inc.	Carol Corp.	Janice Corp.
Apportionment Factor (a)	43,918	7,312	3,832
Dividend (b)	1,700	475	660
Taxable Income (a) - (b)	42,218	6,837	3,172

Tax Liability

To calculate the Tax Liability we need to multiply the taxable income with the tax rate.

Tax Liability = 15% * 52,227 = $7,834

Tax Liability of State X is $7,834