S_corp_allocations_solution

S_corp_allocations_solution - Solution: Allocation of S...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Solution : Allocation of S corporation income & stock basis adjustments KJA, Inc is an electing S corporation with 100 shares outstanding. Karl owns 50 shares (basis: $100,000), John owns 25 shares (basis: $50,000), and Antoine owns 25 shares (basis: $50,000). During 2010, KJA had ordinary income of $50,000 and recognized a LTCG of $36,500. (a) What is Karl, John and Antoine’s share of ordinary income (OI) and LTCG? Karl: OI = $25,000; LTCG = $18,250 John: OI = $12,500; LTCG = $9,125 Antoine: OI = $12,500; LTCG = $9,125 (b) Assume instead that Antoine sold his shares to Michael on February 28, 2010 (a non-leap year) for $65,000. How much S corporation income does Antoine and Michael, respectively recognize? How much gain does Antoine recognize on the sale of his S corporation shares to Michael? Antoine: OI = $12,500 * (28+31)/365 = $2,021 LTCG = $9,125 * (28+31)/365 = $1,475 Basis = $50,000 + $2,021 + $1,475 = $53,496 LTCG = $65,000 – $53,496 = $11,504 (from sale of stock) Michael:
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.
Ask a homework question - tutors are online