Question

A. Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. On March 15,...

A.

Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. On March 15, 2019, Blinkin sells his shares to Nod. How much income should Blinkin report from SleepEZ for 2019 under the daily allocation? Refer to the following table for the timing of SleepEZ’s income.

Period

Income

January 1 through March 15 (74 days)

$100,000

March 16 through December 31 (291 days)

345,500

January 1 through December 31, 2019 (365 days)

$445,500

B.

Based upon the same facts in the prior question, how much income should Nod report from SleepEZ for 2019 under the specific identification method?

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Answer #1

Sollution 1

Blinkin should report $30106.85 Income from SleepEZ for 2019 under the daily allocation

Working

Daily allocation method
Name Working Amount
Winkin (445500*365/365*1/3) $148,500.00
Blinkin (445500*74/365*1/3) $30,106.85
Nod       (445500*365/365*1/3 )+(445500*291/365*1/3
($148500+118393.15)= $266,893.15
Total $445,500.00

Sollution2

Nod should report $263666.67  Income from SleepEZ for 2019 under the specific identification method

Working

Specific identification method
Name Working Amount
Winkin (100000*1/3)+(345500*1/3)= $148,500.00
Blinkin (100000*1/3)+(345500*0/3)= $33,333.33
Nod (100000*1/3)+(345500*2/3)= $263,666.67
Total $445,500.00
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