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 Sales revenue Cost of goods sold. Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Overall net income. Distributions Year 1 $ 300,000 (40,000) (40,000) (25,000) (20,000) (30,000) 12,000 1,500 0 $ 158,500 $ 30,000 Year 2 $430,000 (60,000) (80,000) (50,000) (40,000) (50,000) 22,500 4,000 (2,000) $ 174,500 $ 50,000
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 Sales revenue Cost of goods sold. Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Overall net income. Distributions Year 1 $ 300,000 (40,000) (40,000) (25,000) (20,000) (30,000) 12,000 1,500 0 $ 158,500 $ 30,000 Year 2 $430,000 (60,000) (80,000) (50,000) (40,000) (50,000) 22,500 4,000 (2,000) $ 174,500 $ 50,000
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 30P
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Transcribed Image Text: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.
Sales revenue
Cost of goods sold
Salary to owners Julio and Milania
Employee wages
Depreciation expense
Section 179 expense.
Interest income (related to business income)
Municipal bond income
Government fines.
Overall net income
Falcons Corporation (an S Corporation)
Income Statement
December 31, Year 1 and Year 2
Distributions
Ordinary Income
Amount
Year 1
$ 300,000
(40,000)
(40,000)
(25,000)
(20,000)
(30,000)
12,000
1,500
0
Julio
$ 158,500
$ 30,000
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).
Year 2
$430,000
(60,000)
(80,000)
Milania
(50,000)
(40,000)
(50,000)
22,500
4,000
(2,000)
$ 174,500
$ 50,000
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