Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. On March 15, 2018,...

Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. On March 15, 2018, Blinkin sells his shares to Nod. How much income should Blinkin report from SleepEZ for 2018 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, 2018 (365 days)	$445,500

Solutions

Expert Solution

Income ratio for January 1 through March 15 (74 days)	1:1:1
Income ratio after March 15	1:2

Income allocation on the basis of daily allocation
		Income distributed to
Period	Income	Winkin	Blinkin	Nod
January 1 through March 15 (74 days)	1,00,000.00	33,333.33	33,333.33	33,333.33
March 16 through December 31 (291 days)	3,45,500.00	1,15,166.67	2,30,333.33
January 1 through December 31, 2018 (365 days)	4,45,500.00	1,48,500.00	2,97,000.00
Income allocation on the basis of daily allocation	8,91,000.00	2,97,000.00	5,60,666.67	33,333.33

ekkarill92 answered 1 year ago

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