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 $25,000 from Falcons Corporation.Falcons Corporation (an S Corporation)Income StatementDecember 31, Year 1 and Year 2 Year 1Year 2Sales revenue$ 300,000$ 430,000Cost of goods sold(40,000)(60,000)Salary to owners Julio and Milania(40,000)(80,000)Employee wages(25,000)(50,000)Depreciation expense(20,000)(40,000)Section 179 expense(30,000)(50,000)Interest income (related to business income)12,00022,500Municipal bond income1,5004,000Government fines0(2,000)Overall net income$ 158,500$ 174,500Distributions$ 30,000$ 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). Ordinary IncomeAllocated wagesDistributionsMunicipal bond incomeQualified business incomeSection 179 expenseUnadjusted basis of qualified propertyNondeductible finesAmountJulioMilania

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Answered: Ordinary Income Allocated wages…

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter6: Deductions And Losses: In General

Section: Chapter Questions

Problem 7DQ

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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.

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