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Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 2, Julio and Milania each
Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 2, Julio and Milania each received distributions of $25,000 from Falcons Corporation.
Falcons Corporation (an S Corporation) | ||
Income Statement | ||
December 31, Year 1 and Year 2 | ||
Year 1 | Year 2 | |
---|---|---|
Sales revenue | $ 300,000 | $ 430,000 |
Cost of goods sold | (40,000) | (60,000) |
Salary to owners Julio and Milania | (40,000) | (80,000) |
Employee wages | (25,000) | (50,000) |
Depreciation expense | (20,000) | (40,000) |
Section 179 expense | (30,000) | (50,000) |
Interest income (related to business income) | 12,000 | 22,500 |
Municipal bond income | 1,500 | 4,000 |
Government fines | 0 | (2,000) |
Overall net income | $ 158,500 | $ 174,500 |
Distributions | $ 30,000 | $ 50,000 |
a. What amount of ordinary income and separately stated items are allocated to them for year 2 based on the information above? Assume that Falcons Corporation has $200,000 of qualified property (unadjusted basis).
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