WRT, a calendar year S corporation, has 100 shares of outstanding stock. At the beginning of...

WRT, a calendar year S corporation, has 100 shares of outstanding stock. At the beginning of the year, Mr. Wallace owned all 100 shares. On September 30, he gave 25 shares to his brother and 40 shares to his daughter. WRT’s ordinary income for the year was $216,000. What portion of this income must each shareholder include in income? Assume 365 days in a year. (Round income per day of ownership to 4 decimal places. Round your final answers to the nearest whole dollar amount.)

Brother $____

Daughter $______

Mr. Wallace $____

Solutions

Expert Solution

Solution:

Calculation of Income per share = $216,000/100 = $2,160 per share

Income per Share per day = $2,160 / 365 = $5.9178 per share per day

Calculation of days of holding

Mr. Wallace has 100 shares from from 1 January to 30^th September = 273 Days

Mr. Wallace has 35 shares from from 1 October to 31^st December = 92 Days

Brother has 25 shares from from 1 October to 31^st December = 92 Days

Daughter has 40 shares from from 1 October to 31^st December = 92 Days

Calculation of income to be included in each Shareholder’s Income

	$
Calculation of Income of Mr. Wallace
100 Shares x $5.9178 x 273 days	1,61,556.16
35 Shares x $5.9178 x 92 days	19,055.34
	1,80,611.51
Calculation of Income of Brother
25 Shares x $5.9178 x 92 days	13,610.96

Calculation of Income of Daughter
40 Shares x $5.9178 x 92 days	21,777.53
Total Income	2,16,000.00

ekkarill92 answered 2 hours ago

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