Castle Corporation conducts business in States 1, 2, and 3. Castle’s $630,000 ta

Question

Castle Corporation conducts business in States 1, 2, and 3. Castle’s $630,000 taxable income consists of $555,000 apportionable income and $75,000 allocable income generated from transactions conducted in State 3. Castle’s sales, property, and payroll are evenly divided among the three states, and the states all employ a three-equal-factors apportionment formula.

Determine how much of Castle’s income is taxable in each of the following states.

a. State 1: $ _________

b. State 2: $ _________

c. State 3: $ _________

Explanation / Answer

Under three factor apportionment in origins to generation of receipt we also consider the payroll expenses and also the value of the property in the given state.

As given in the question we need to apportionment $555,000 only between the three given state because is $75000already apportioned to the state 3 bacause it was specifically generated in that state.

In therefore we need to apportioned only $555,000 between three states under three factor apportinment formula we consider the sales, payroll & Property Value for apportionment of income but as given in the question the the value for sales, Payroll & property values are all same therefore we just Need to distribute $555,000 equally among all the three states.

Therefore $555,000/3=$185,000 for each state

Castle Income Taxable for each state will be

State 1 $185,000

State 2 $185,000

State 3 (185,000+75000)= $260,000

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