Calculating Ashton Corporation's Pennsylvania State Tax Liability
Question:
Answer:
The Pennsylvania state tax liability for Ashton Corporation can be calculated by following the steps provided in the data. Firstly, determine the taxable income by subtracting the nonbusiness income from the total income. Then, calculate the apportioned income by multiplying the taxable income by the apportionment factor. Next, determine the nonbusiness income allocated to Pennsylvania and subtract it from the apportioned income to get the Pennsylvania taxable income. Finally, multiply the Pennsylvania taxable income by the Pennsylvania corporate tax rate to find the state tax liability, which in this case is approximately $14,447.Detailed Explanation:
1. Determining Taxable Income: Total income - Nonbusiness income = Taxable income
In this case: $543,000 - $63,000 = $480,000
2. Calculating Apportioned Income: Taxable income x Apportionment factor = Apportioned income
In this case: $480,000 x 42.35% = $203,280
3. Nonbusiness Income Allocated to Pennsylvania: $28,250
4. Determining Pennsylvania Taxable Income: Apportioned income - Nonbusiness income allocated to Pennsylvania = Pennsylvania taxable income
In this case: $203,280 - $28,250 = $175,030
5. Calculating Pennsylvania State Tax Liability: Pennsylvania taxable income x Pennsylvania corporate tax rate = Pennsylvania state tax liability
In this case: $175,030 x 8.25% ≈ $14,447