1. Olga’s proprietorship earned a net profit of $95,000 during the year
and she withdrew $70,000 of this profit. Olga must report $70,000 net
income from the proprietorship on her individual income tax return (Form
2. Rose is a 50% partner in Wren Partnership. During the year, Wren
earned net profit of $100,000 ($210,000 gross income – $110,000
operating expenses) and distributed $20,000 to each partner. Rose must
report Wren Partnership profit of $20,000 on her Federal income tax
3. Rajib is the sole shareholder of Robin Corporation, a calendar year S
corporation. Robin earned net profit of $350,000 ($520,000 gross income
– $170,000 operating expenses) and distributed $80,000 to Rajib. Rajib
must report Robin Corporation profit of $350,000 on his Federal income
4. Donald owns a 60% interest in a partnership that earned $230,000 in
the current year. He also owns 60% of the stock in a C corporation that
earned $230,000 during the year. Donald received $50,000 in
distributions from each of the two entities during the year. With
respect to this information, Donald must report $188,000 of income on
his individual income tax return for the year.
5. Quail Corporation is a C corporation with net income of $300,000
during 2011. If Quail paid dividends of $50,000 to its shareholders,
the corporation must pay tax on $300,000 of net income. Shareholders
must report the $50,000 of dividends as income.
6. Eagle Company, a partnership, had a short-term capital loss of
$10,000 during the year. Aaron, who owns 25% of Eagle, will report
$2,500 of Eagle’s short-term capital loss on his individual tax return.