Adams Corporation Owns and Operates Two Manufacturing Facilities, One in State

question 125

Multiple Choice

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.
Adams's income attributed to X is:

• A) $0.
• B) $3,250,000.
• C) $3,900,000.
• D) $5,000,000.
• E) $6,000,000.