Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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).
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started