Principles of Taxation for Business and Investment Planning 2020 Edition
23rd Edition
ISBN: 9781260433210
Author: Jones, Sally
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 1, Problem 6IRP
Acme Corporation was formed under the laws of State X and has its corporate headquarters in that state. Acme operates a manufacturing plant in State Y and sells goods to customers in States X, Y, and Z. All three states have a corporate income tax. This year, Acme’s net profit from its tristate operation was $14 million.
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Cromwell Corporation does business in two states, A and B. State A uses an equal-weighted, three-factor apportionment formula and
has a 5 percent state tax rate. State B uses an apportionment formula that double-weights the sales factor and has a 6 percent state
tax rate. Cromwell's state-level taxable income, before apportionment, is $3.5 million. It has identified the following components of its
sales, payroll, and property factors:
Sales
Payroll
Average property
Required A Required B
State A
$ 7,500,000
3,500,000
2,500,000
Required:
a. Calculate Cromwell's apportionment factors, income apportioned to each state, and state tax liability.
b. State B is considering changing its apportionment formula to place 100 percent of the weight on the sales factor, ignoring payroll
and property for apportionment purposes. Given its current levels of activity, what would Cromwell's state tax liability be for each
state?
Complete this question by entering your answers in the tabs below.…
Cromwell Corporation does business in two states, A and B. State A uses an equal-weighted, three-factor apportionment formula and
has a 5 percent state tax rate. State B uses an apportionment formula that double-weights the sales factor and has a 6 percent state
tax rate. Cromwell's state-level taxable income, before apportionment, is $3.5 million. It has identified the following components of its
sales, payroll, and property factors:
Sales
Payroll
Average property
Required:
State A
$ 7,500,000
3,500,000
2,500,000
State B
$ 4,750,000
2,700,000
1,550,000
Total
$ 12,250,000
6,200,000
4,050,000
a. Calculate Cromwell's apportionment factors, income apportioned to each state, and state tax liability.
b. State B is considering changing its apportionment formula to place 100 percent of the weight on the sales factor, ignoring payroll
and property for apportionment purposes. Given its current levels of activity, what would Cromwell's state tax liability be for each
state?
Answer is not…
Tennis Pro is headquartered in Virginia. Assume it has a state income tax base of $240,000 after
making the appropriate adjustments. Of this amount, $60,000 was non-business income.The non-
business income included the following: $8,000 of dividend income, $15,000 of interest income,
$37,000 of royalty income for an intangible used in Maryland.
Tennis Pro has the following sales, payroll and property factors:
Virginia
Maryland
Sales
40%
20%
Payroll
80%
5%
Property
90%
5%
Assume that Virginia uses an equally weighted three-factor formula. Assuming a Virginia corporate
tax rate of 6 percent, what is Tennis Pro's Virginia state tax liability? (Round your answer to the
nearest whole number.)
Chapter 1 Solutions
Principles of Taxation for Business and Investment Planning 2020 Edition
Ch. 1 - Prob. 1QPDCh. 1 - Prob. 2QPDCh. 1 - Prob. 3QPDCh. 1 - Prob. 4QPDCh. 1 - Prob. 5QPDCh. 1 - A local government imposed a new 2 percent tax on...Ch. 1 - Prob. 7QPDCh. 1 - Prob. 8QPDCh. 1 - Prob. 9QPDCh. 1 - Prob. 10QPD
Ch. 1 - Prob. 11QPDCh. 1 - Prob. 12QPDCh. 1 - Prob. 13QPDCh. 1 - Prob. 14QPDCh. 1 - One way for the federal government to increase tax...Ch. 1 - The Internal Revenue Code and Treasury regulations...Ch. 1 - Mr. Josh Kenney, a U.S. citizen and resident of...Ch. 1 - Prob. 2APCh. 1 - Prob. 3APCh. 1 - This year, State A raised revenues by increasing...Ch. 1 - Prob. 5APCh. 1 - Prob. 6APCh. 1 - Prob. 7APCh. 1 - Prob. 8APCh. 1 - Prob. 9APCh. 1 - Mrs. Doyle, a resident of Rhode Island, traveled...Ch. 1 - Prob. 11APCh. 1 - Prob. 12APCh. 1 - Mr. and Mrs. Underhill operate a hardware store in...Ch. 1 - Prob. 14APCh. 1 - Wallis Company produces circuit boards in a...Ch. 1 - Prob. 1IRPCh. 1 - Prob. 2IRPCh. 1 - Bailey Company, which has offices in six states,...Ch. 1 - Prob. 4IRPCh. 1 - Yarrow Company orders 500,000 of office furniture...Ch. 1 - Acme Corporation was formed under the laws of...Ch. 1 - Prob. 7IRPCh. 1 - Prob. 8IRPCh. 1 - Prob. 9IRPCh. 1 - Mr. Imhoff, age 72, has lived in Los Angeles his...Ch. 1 - Prob. 1TPCCh. 1 - KTR Company earns a 10 profit on each unit of...
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- Cromwell Corporation does business in two states, A and B. State A uses an equal-weighted, three-factor apportionment formula and has a 5 percent state tax rate. State B uses an apportionment formula that double-weights the sales factor and has a 6 percent state tax rate. Cromwell's state-level taxable income, before apportionment, is $2 million. It has identified the following components of its sales, payroll, and property factors: Sales Payroll Average property State A $ 6,000,000 2,000,000 1,000,000 Required A Required B Required: a. Calculate Cromwell's apportionment factors, income apportioned to each state, and state tax liability. b. State B is considering changing its apportionment formula to place 100 percent of the weight on the sales factor, ignoring payroll and property for apportionment purposes. Given its current levels of activity, what would Cromwell's state tax liability be for each state? Complete this question by entering your answers in the tabs below. Apportionment…arrow_forwardAshton Corporation is headquartered in Pennsylvania and has a state income tax base there of $543,000. Of this amount, $63,000 was nonbusiness income. Ashton's Pennsylvania apportionment factor is 42.35 percent. The nonbusiness income allocated to Pennsylvania was $28,250. Assuming a Pennsylvania corporate tax rate of 8.25 percent, what is Ashton's Pennsylvania state tax liability?arrow_forwardHerger Corporation does business in California, Nevada, and Oregon, and has nexus in these states as well. Herger’s California state tax base was $943,500 after making the required federal/state adjustments. Herger’s federal tax return contains the following items: Item $ Federal T-note interest income 5,900 Nevada municipal bond interest income 3,690 California municipal bond interest income 5,500 Interest expense related to T-note interest income 1,540 Royalty income 181,000 Travel expenses 10,100 Determine Herger’s California business income.arrow_forward
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