Question

Warbler Corporation has Federal taxable income of $10,000,000. Warbler apportions 70% of its manufacturing income to State C. Warbler generates $4,000,000 of nonapportionable income each year, and 30% of that income is allocated to State C. Applying the state income tax modifications, Warbler's total business income from the manufacturing operation this year is $12,000,000.
a. How much of Warbler's manufacturing income does State C tax?
b. How much of Warbler's allocable income does State C tax?

Answer 1

Answer: See Explanation

Explanation:

a. How much of Warbler's manufacturing income does State C tax?

Warbler business income = $12,000,000.

Percentage apportioned to State C = 70%.

Therefore, the amount of Warbler's manufacturing income that State C tax will be:

= $12,000,000 × 70%

= $12,000,000 × 0.7

= $8,400,000.

b. How much of Warbler's allocable income does State C tax?

This will be 30% of the nonapportionable income generated by Warbler. This will be:

= $4,000,000 × 30%

= $4,000,000 × 0.3

= $1,200,000