Use Exhibit 24.1 to provide the required information for Warbler Corporation, whose Federal taxable income totals $10 million. Warbler apportions 70% of its manufacturing income to State C. Warbler generates $4 million of nonapportionable income each year, and 30% of that income is allocated to C. Applying the state income tax modifications, Warbler’s total business income from the manufacturing operation this year is $12 million.

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

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

c. Explain your results.

Exhibit 24.1

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EXHIBIT 24.1 Computing Corporate State Income Tax Liability State Modifications Could be plus or minus = State Taxable Income Apportionable (Business) Income Apply tax rates Federal Taxable Income" Apply state's apportionment fraction Subtract state tox credits = State tax liability Nonapportionable Income Allocate to the appropriate state * Most states use either line 28 or line 30 of the Federal corporate income tax return (Form 1120). In other states, the corporation is required to identify and report each element of income and deduction on the state return.