Sharon Inc. is headquartered in State X and owns 100 percent of Carol, Josey, an

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:

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.

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.

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

Explanation / Answer

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

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