John owns all the stock of Lucas Corporation, an S corporation. John's basis for the 1,000 shares is $130,000. On June 11 of the current year (assume a non-leap year), John gifts 100 shares of stock to his younger brother Michael, who has been working in the business for one year. Lucas Corporation reports $125,000 of ordinary income for the current year. Requirement What amount of income is allocated to John? To Michael? (Use a 365-day year for computations. Do not round intermediary calculations. Only round the amount you enter in the input field to the nearest dollar.) John Michael Ordinary income allocated
John owns all the stock of Lucas Corporation, an S corporation. John's basis for the 1,000 shares is $130,000. On June 11 of the current year (assume a non-leap year), John gifts 100 shares of stock to his younger brother Michael, who has been working in the business for one year. Lucas Corporation reports $125,000 of ordinary income for the current year. Requirement What amount of income is allocated to John? To Michael? (Use a 365-day year for computations. Do not round intermediary calculations. Only round the amount you enter in the input field to the nearest dollar.) John Michael Ordinary income allocated
Chapter15: Taxing Business Income
Section: Chapter Questions
Problem 2DQ
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Transcribed Image Text:John owns all the stock of Lucas Corporation, an S corporation. John's basis for the 1,000 shares is $130,000. On June 11 of the
current year (assume a non-leap year), John gifts 100 shares of stock to his younger brother Michael, who has been working in the
business for one year. Lucas Corporation reports $125,000 of ordinary income for the current year.
Requirement
What amount of income is allocated to John? To Michael? (Use a 365-day year for computations. Do not round intermediary
calculations. Only round the amount you enter in the input field to the nearest dollar.)
John
Michael
Ordinary income allocated
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