Julio and Milania are owners of Falcons Corporation, an S corporation. They each own 50 percent of Falcons Corporation. In year 2, Julio and Milania each received distributions of $25,000 from Falcons Corporation. Falcons Corporation (an 3 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) Municipal bond income Government fines Overall net income Distributions Year 1 $300,000 (40,000) (40,000) (80,000) (25,000) (50,000) (20,000) (40,000) (30,000) (50,000) 12,000 1,500 0 Year 2 $430,000 (60,000) $158,500 $30,000 22,500 4,000 (2,000) $174,500 $50,000 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).
Julio and Milania are owners of Falcons Corporation, an S corporation. They each own 50 percent of Falcons Corporation. In year 2, Julio and Milania each received distributions of $25,000 from Falcons Corporation. Falcons Corporation (an 3 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) Municipal bond income Government fines Overall net income Distributions Year 1 $300,000 (40,000) (40,000) (80,000) (25,000) (50,000) (20,000) (40,000) (30,000) (50,000) 12,000 1,500 0 Year 2 $430,000 (60,000) $158,500 $30,000 22,500 4,000 (2,000) $174,500 $50,000 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).
Chapter20: Corporations And Parterships
Section: Chapter Questions
Problem 4BCRQ
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Transcribed Image Text:Julio and Milania are owners of Falcons Corporation, an S corporation. They each own 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)
Municipal bond income
Government fines
Overall net income
Distributions
Ordinary Income
Section 179 expense
Qualified business income
Municipal bond income
Distributions
Nondeductible fines
Year 1
$300,000
(40,000)
(60,000)
(40,000)
(80,000)
(25,000) (50,000)
(20,000)
Amount
Year 2
$430,000
(40,000)
(30,000) (50,000)
12,000
1,500
0
$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).
Julio
22,500
4,000
(2,000)
$174,500
$50,000
Milania
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