Question

Question: Jack and Jill are owners of UpAHill, an S corporation. They own 25 and 75 percent, respectively. ...

Jack and Jill are owners of UpAHill, an S corporation. They own 25 and 75 percent, respectively.

UpAHill Corporation (an S corporation)
Income Statement
December 31, Year 1 and Year 2
	Year 1				Year 2
Sales revenue	$	175,000			$	310,000
Cost of goods sold		(60,000	)			(85,000	)
Salary to owners Jack and Jill		(40,000	)			(50,000	)
Employee wages		(15,000	)			(20,000	)
Depreciation expense		(10,000	)			(15,000	)
Miscellaneous expenses		(7,500	)			(9,000	)
Interest income (related to business)		2,000				2,500
Qualified dividend income		500				1,000
Overall net income	$	45,000			$	134,500

a. What amount of ordinary income and separately stated items are allocated to them for years 1 and 2 based on the information above? Assume that UpAHill Corporation has $100,000 of qualified property (unadjusted basis) in both years.

Ordinary income and qualified business income for both years?

Answer 1

computation of ordinary income & separately stated income

Ordinary income = overall income-interest income-dividend income

ordinary income = 45000-2000-500

ordinary income = 42500

Separately stated income = interest income+dividend income

saparately stated income = 2000+500

separately stated income = 2500

year - 2

ordinary income = overall income-interest income-dividend income

ordinary income = 134500-2500-1000

ordinary income = 131000

separatly stated income = interest income +dividend income

separatly stated income = 2500+1000

separaty stated income = 3500

	25%	75%
yr 1	10625	31875
yr 2	32750	98250
separately stated income
yr 1	625	1875
yr 2	875	2625