LO1 EndLand Company reports the following results for the current year:

a. Assume that EndLand is a partnership owned by Kira (60%) and Justin (40%).
Kira receives a salary of $70,000, and Justin receives a salary of $60,000. The salaries are not guaranteed payments. Determine the tax treatment of EndLand’s operating results and the effects of the results on Kira and Justin.

b. Assume the same facts as in part

a, except that EndLand is an S corporation. Determine the tax treatment of EndLand’s operating results and the effect of the results on Kira and Justin.

c. Assume the same facts as in part

b, except that EndLand is an S corporation. Determine the tax treatment of EndLand’s operating results and the effect of the results on Kira and Justin.

Transcribed Image Text:

Gross profit from sales $350,000 Dividends received (less than 20% ownership) 40,000 Long-term capital loss 60,000 Salaries paid to employees 70,000 Salaries paid to owners 130,000 Investment expenses 10,000 Depreciation (including $40,000 expensed under Section 179) Charitable contributions 90,000 30,000