On January 1, 2022, Sam and Sara formed a new business entity called Nice Brother Co. Sam contributes $250,000 cash and Sara contributes land with an adjusted basis of $300,000 and fair market value of $492,000 with a mortgage of $258,000 that is assumed by Nice Brother Co. Assume the following operating results for 2022: Sales $ 1,500,000 Interest income – from a bank $ 3,200 Royalties $ 60,000 Loss from sale of investment $ (7,000) Cost of goods sold $ 622,000 Salaries $ 450,000 Rent $ 144,000 Maintenance $ 24,000 Utilities $ 58,000 EPA penalty $ 1,000 Depreciation ? Charitable contribution $ 30,000 Payment to Sam for retirement* $ 15,000 *payment considered a guaranteed payment if the entity is a partnership The company’s only depreciable asset is equipment (useful life of 5 years) which will be purchased in 2022 for $100,000. The only asset sold was an investment purchased on 2/2/22 for $28,000 and sold on 11/4/22 for $21,000 What are the separately stated items allocated to Sam if the entity is a Partnership? What are the separately stated items allocated to Sam if the entity is a S Corporation?
On January 1, 2022, Sam and Sara formed a new business entity called Nice Brother Co. Sam contributes $250,000 cash and Sara contributes land with an adjusted basis of $300,000 and fair market value of $492,000 with a mortgage of $258,000 that is assumed by Nice Brother Co.
Assume the following operating results for 2022:
Sales $ 1,500,000
Interest income – from a bank $ 3,200
Royalties $ 60,000
Loss from sale of investment $ (7,000)
Cost of goods sold $ 622,000
Salaries $ 450,000
Rent $ 144,000
Maintenance $ 24,000
Utilities $ 58,000
EPA penalty $ 1,000
Depreciation ?
Charitable contribution $ 30,000
Payment to Sam for retirement* $ 15,000
*payment considered a guaranteed payment if the entity is a partnership
The company’s only
The only asset sold was an investment purchased on 2/2/22 for $28,000 and sold on 11/4/22 for $21,000
What are the separately stated items allocated to Sam if the entity is a Partnership?
What are the separately stated items allocated to Sam if the entity is a S Corporation?
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