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16 August, 01:22

Adams Corporation owns and operates two manufacturing facilities, one in State X and the other in State Y. Due to a temporary decline in the corporation's sales, Adams has rented 20% of its Y facility to an unaffiliated corporation.

Adams generated $1,000,000 net rental income and $5,000,000 income from manufacturing. Adams is incorporated in Y. For X and Y purposes, rental income is classified as allocable nonbusiness income. By applying the statutes of each state, Adams determined that its apportionment factors are 0.65 for X and 0.35 for Y.

Required:

1. Adams's income attributed to X is:

a. $3,250,000.

b. $5,000,000.

c. $0.

d. $3,900,000.

e. $6,000,000.

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Answers (1)
  1. 16 August, 01:35
    0
    correct option is a. $3,250,000

    Explanation:

    given data

    Adams rent = 20% of Y facility

    net rental income = $1,000,000

    income from manufacturing = $5,000,000

    solution

    we get here first total taxable Income that is

    total taxable Income = $1,000,000 + $5,000,000

    total taxable Income = $6,000,000

    and Apportion able Income will be

    Apportion able Income = total taxable Income - Allocable Income

    Apportion able Income = $6,000,000 - 1,000,000

    Apportion able Income = $5,000,000

    and Income Apportioned to State X is

    Income Apportioned to State X = 65% of $5,000,000

    Income Apportioned to State X = 3,250,000

    so Income Subject to Tax in State X is $3,250,000

    correct option is a. $3,250,000
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