1. Determine and explain the amount of ordinary income and separately stated items allocated to them for Year 1 based on the information given in the table above. Assume that Buffalo Corporation has qualified property with an unadjusted basis of $400,000.
2. Complete the S Corporation Form 1120S, Schedule K for Year 1 and Schedule K-1 for Jamya.
3. Determine and explain the amount of ordinary income and separately stated items are allocated to them for Year 2 based on the information given in the table above, assuming Buffalo Corp has qualified property with an unadjusted basis of $400,000.
4. Complete the S Corporation Form 1120S, Schedule K for Year 2 and Schedule K-1 for Manu.

Please explain and label each section of the answer.

Taxation of an S Corporation

Jamya and Manu are the shareholders of Buffalo Corporation an S Corporation. They each own 50% of Buffalo Corporation. In Year 1, Jamya and Manu each received distributions of $30,000 from Buffalo Corporation. In Year 2, they received distributions each of $50,000.

Buffalo Corporation (an S Corporation) Income Statement, Dec. 31, 20x8 and 20X9	20X8(Year 1)	20X9(Year 2)
Sales revenue	$600,000	$860,000
Cost of goods sold	(80,000)	(120,000)
Salary to shareholders Manu and Jamya	(80,000)	(160,000)
Employee wages	(50,000)	(100,000)
Depreciation expense	(40,000)	(80,000)
Section 179 expense	(60,000)	(100,000)
Interest income ( related to business)	24,000	45,000
Municipal bond income	3,000	8,000
Government fines	0	(4000)
Overall net income	317,000	349,000
Distributions	$60,000	$100,000

Please explain and label each section of the answer.