Julio and Milania are owners of Falcons Corporation, an S corporation. They each own 50 percent of Falcons Corporation. In year 1, Julio and Milania each received distributions of $15,000 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)		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 1 based on the information above? Assume that Falcons Corporation has $200,000 of qualified property (unadjusted basis).

Answer ise complete but not enti rely correct. Allocated to Allocated to Amount Milania Julio Ordinary Income Section 179 expense 15,000 30,000 15,000 Qualified business income 0 79,250 79,250 Municipal bond income 750 1,500 750 $ 30,000 Distributions 15,000 $ 15,000 Answer ise complete but not enti rely correct. Allocated to Allocated to Amount Milania Julio Ordinary Income Section 179 expense 15,000 30,000 15,000 Qualified business income 0 79,250 79,250 Municipal bond income 750 1,500 750 $ 30,000 Distributions 15,000 $ 15,000