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).

	Amount	Allocated to Julio	Allocated to Milania
Ordinary Income