Problem Three 5 points Beta Corporation is the parent company of an affiliated group of corporations that file a federal consolidated return. Beta owns 100% of the stock of Delta, Eta, Iota, and Pi. The state tax information for each corporation is provided in the table below. You are responsible for the state tax filing in State Y for the Beta group of companies. State Y provides that you can file in any one of three ways: 1) separate company each company that has nexus with State Y must file a separate company tax return with State Y. 2) nexus consolidated separate methodology each company that has nexus with State Y can join in a nexus consolidated return in State Y, using the separate company methodology. This is often referred to as a post apportionment consolidation. State Y is not a unitary filing state. 3) nexus consolidated consolidated methodology each company that has nexus with State Y can join in a nexus consolidated return in State Y, using the consolidated methodology. This is often referred to as a pre apportionment consolidation. State Y is not a unitary filing state. Calculate the tax under each of the three methods and determine which is most favorable for the Beta group of companies. Assume State Y uses a 1 factor only receipts formula. The tax rate in State Y is 10%.

Taxable income Apportionment Factor in Y (sales in Y/everywhere sales) Beta 1,000,000 5,000,000/20,000,000 Delta 3,000,000 2,000,000/5,000,000 Eta <2,500,000> 3,000,000/5,000,000 Iota <2,000,000> 0/5,000,000* Pi 10,000,000 15,000,000/20,000,000 * no nexus with State Y.