Question

Sharon Inc. is headquartered in State X and owns 100 percent of Carol, Josey, and Janice Corps, 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. Do not round intermediate calculations. Round 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.

	Apportionment factors: State X Sharon Carol Josey Janice

b. Calculate the business income apportioned to State X.

	State X Business Income

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

	State taxable income reported: State X Sharon Carol Josey Janice

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

	State X Tax liability

Answer 1

Solution:

Calculation the State X apportionment factor for Sharon Inc., Carol Corp., Josey Corp., and Janice Corp and Calculation the business income apportioned to State X and Calculation of the Tax Liability and Taxable Income:

Josey has no nexus in State X because it has no property or payroll there (no physical presence). The State X tax liability is $8,158 calculated as follows:

		Sharon	Carol	Josey (No NEXUS)	Janice
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
Sales		0.68	0.20		0.34
Property		0.59	0.20		0.32
Payroll		1.00	0.24		0.00
		2.27	0.64		0.66
Apportionment Factor		0.7333	0.18		0.2222
Income		$58,200	$34,250		$17,300
Apportioned Income		$42,678	$6,165		$3,844
Allocated Income		$1,700	$0		$0
State Taxable Income		$44,378	$6,165		$3,844	$54,387	Taxable Income
						15%	Tax Rate
						$8,158	State Tax Liability