Year Year 2 $ 175,000 (60,000) ( 40,000) (15,000) (10,000) $ 310,000 (85,000) (50,000) (20,000) (15,000)
Year Year 2 $ 175,000 (60,000) ( 40,000) (15,000) (10,000) $ 310,000 (85,000) (50,000) (20,000) (15,000)
Chapter15: Taxing Business Income
Section: Chapter Questions
Problem 2DQ
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Question
I need help with (Allocated wages)
Transcribed Image Text:Jack and Jill are owners of UpAHill, an S Corporation. They own 25 and 75 percent, respectively.
UpAHill Corporation (an S Corporation)
Income Statement
December 31, Year 1 and Year 2
Year 1
Year 2
$ 175,000
(60,000)
(40,000)
(15,000)
(10,000)
(7,500)
2,000
$ 310,000
(85,000)
(50,000)
(20,000)
(15,000)
(9,000)
2,500
Sales revenue
Cost of goods sold
Salary to owners Jack and Jill
Employee wages
Depreciation expense
Miscellaneous expenses
Interest income (related to business)
Qualified dividend income
500
1,000
$ 134,500
Overall net income
$ 45,000
a. What amount of ordinary income and separately stated items are allocated to them for years 1 and 2 based on the information
above? Assume that UpAHill Corporation has $100,000 of qualified property (unadjusted basis) in both years.
Jack
Jill
Year 1
Year 2
Year 1
Year 2
Ordinary income
$
11,125 $
33,375
33,375 $
100,125
Qualified business income
$
11,125 $
33,375
33,375 $
100,125
Dividend income
$
125 $
250
$
375 $
750
Allocated wages
Unadjusted basis of qualified property
$
25,000 $
25,000 $
75,000 $
75,000
%24
%24
%24
Expert Solution
Step 1
Jack and Jill are owners of Up A Hill, an S corporation.
Jack has = 25%
Jill = 75%
| Jack | Jill | |||
| Year-1 | Year-2 | Year-1 | Year-2 | |
| Ordinary Income | $11,125 | $33,375 | $33,375 | $100,125 |
| Qualified Business income | $11,125 | $33,375 | $33,375 | $100,125 |
| Dividend income | $125 | $250 | $375 | $750 |
| Allocated wages | $3,750 | $5,000 | $11,250 | $15,000 |
| Unadjusted basis of qualified property | $25,000 | $25,000 | $75,000 | $75,000 |
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