Problem 22-53 (LO 22-3) (Static) Skip to question [The following information applies to the questions displayed below.] 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

Problem 22-53 Part a (Static)

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).

	Amount	Julio	Milania
Ordinary Income	$150,000	$75,000	$75,000
Section 179 expense	50,000	25,000	25,000
Qualified business income	152,000	76,000	76,000
Municipal bond income	4,000	2,000	2,000
Salary to owners Julio and Milania	80,000	40,000	40,000
Allocated wages	$130,000	$65,000	$65,000
Unadjusted basis of qualified property	$200,000	$100,000	$100,000
Government fines	$2,000	$1,000	$1,000