Question

Ashton Corporation is headquartered in Pennsylvania and has a state income tax base there of $580,000. Of this amount, $61,000 was nonbusiness income. Ashton’s Pennsylvania apportionment factor is 40.30 percent. The nonbusiness income allocated to Pennsylvania was $31,500.

Assuming a Pennsylvania corporate tax rate of 8.25 percent, what is Ashton’s Pennsylvania state tax liability? (Round your answer to the nearest whole dollar amount.)

	State tax liability

Answer 1

Solution:
	Ashton’s Pennsylvania state tax liability =$19,854
Working Notes:
	Computation of Ashton’s Pennsylvania state tax liability
	State tax base	$580,000	a= Given
Less	Total allocated income	$61,000	b= Given
	[total nonbusiness income]
	Apportionable income	$519,000	c=a-b
	Pennsylvania apportionment factor	40.30%	d=given
	Pennsylvania apportioned Income	$209,157	e=c x d
	[ Apportionable income x Pennsylvania apportionment factor ]
	[$519,000 x 40.30%]
	Pennsylvania allocated income	$31,500	f = given
	[nonbusiness income allocated to Pennsylvania]
	Taxable income at Pennsylvania	$240,657	g=e+f
	[$209,157 + $31,500]
	Pennsylvania corporate tax rate	8.25%	h=given
	Pennsylvania state tax liability	19854.2025	i=g x h
	[$240,657 x 8.25%]
Hence,
	Pennsylvania state tax liability	19,854
Please feel free to ask if anything about above solution in comment section of the question.