How is the property factor typically valued for a corporation?

The property factor for a corporation is typically valued at its carrying value or adjusted basis. This approach reflects the net book value of the property as recorded on the company’s financial statements, which is the original cost of the asset minus any accumulated depreciation.

Using carrying value ensures that the valuation accounts for the actual investment made by the corporation, adjusting for wear and tear or depreciation that has occurred over time. This method is crucial for accurately distributing income among various jurisdictions, as it recognizes the economic reality of the use of assets rather than their potential market value or cost to replace them.

Other methods of valuation, such as market value or replacement cost, may provide varying figures that could inflate or misrepresent the actual property utilized in generating income. For example, market value can fluctuate widely based on current real estate trends, while replacement cost may not reflect the value recognized on the books. Thus, using the carrying value provides a consistent and stable basis for calculating the property factor.