Palmetto Corporation realized $300,000 of taxable income from the sales of its p
ID: 2586187 • Letter: P
Question
Palmetto Corporation realized $300,000 of taxable income from the sales of its products in States A and B. Palmetto's activities in both states establish nexus for income tax purposes. Palmetto's sales, payroll, and property in the states include the following:
Palmetto Corporation has nexus with States A and B. Apportionable income for the year totals $300,000. Palmetto's apportionment factors for the year use the following data.
State B uses a sales-factor-only apportionment formula.
In your computations, round any division to three decimal places before converting to a percentage and use rounded amounts in subsequent computations. If required, round your final answer to the nearest dollar.
Compute Palmetto's taxable income for the year; B uses a sales-factor-only apportionment formula.
State A State B Totals Sales $540,000 $260,000 $800,000 Property $155,000 $0 $155,000 Payroll $285,000 $0 $285,000Explanation / Answer
Palmetto Corporation Taxable income
$300,000
Palmetto's apportionment percentage
State A
Sales Factor = $540000 / $800000
= 0.675
Payroll Factor = $285000/$285000
= 1
Property Factor = $155000/$155000
= 1
Suppose if State A also uses only sales factor formula
Palmetto's apportionment percentage is
= 67.5%
State B
Sales Factor = $260000/$800000
= 0.325
State B uses sales factor only apportionment formula
Palmetto's apportionment percentage is
= 32.5%
Palmetto Corporation Taxable Income
State A = $300000 x 67.5%
= $ 202500
State B = $300000 x 32.5%
= $ 97500
Palmetto Corporation Taxable income
$300,000
Palmetto's apportionment percentage
State A
Sales Factor = $540000 / $800000
= 0.675
Payroll Factor = $285000/$285000
= 1
Property Factor = $155000/$155000
= 1
Suppose if State A also uses only sales factor formula
Palmetto's apportionment percentage is
= 67.5%
State B
Sales Factor = $260000/$800000
= 0.325
State B uses sales factor only apportionment formula
Palmetto's apportionment percentage is
= 32.5%
Palmetto Corporation Taxable Income
State A = $300000 x 67.5%
= $ 202500
State B = $300000 x 32.5%
= $ 97500
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