Question

Roberto and Reagan are both 25 percent owner/managers for Bright Light Inc. Roberto runs the retail store in Sacramento, CA, and Reagan runs the retail store in San Francisco, CA. Bright Light Inc. generated a $128,150 profit company wide made up of a $75,900 profit from the Sacramento store, a ($27,250) loss from the San Francisco store, and a combined $79,500 profit from the remaining stores. If Bright Light Inc. is an S corporation, how much income will be allocated to Roberto?

Answer 1

Ans:

S-corporation: S corporations are different from C-Corporation, Under S-corporation rules incomes are not taxed at partnership levels, Incomes are however taxed at individual shareholders level in there proportion of shareholding.

Bright Inc. has made a profit of $128,150 from all its stores. Irrespective of income earned from location of stores, Income to be allocated to roberto will be 25% of Bright inc. income.

So income allocated to Roberto will be :

$128,150*25% = $32,027.5

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