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Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed...

Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed below, how much income should each report from SleepEZ for 2017 under both the daily allocation and the specific identification allocation method? Refer to the following table for the timing of SleepEZ’s income. Period Income January 1 through April 18 (108 days) $ 142,000 April 19 through December 31 (257 days) 423,000 January 1 through December 31, 2017 (365 days) $ 565,000 (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) a. There are no sales of SleepEZ stock during the year. Compute income reported via daily allocation method for: Winkin Blinkin Nod b. Compute the income reported via the specific identification method for: Winkin Blinkin Nod

Solutions

Expert Solution

No Sales Of Sleepz Stock During Year

Under this condition that no sales occur Value will be same under both method. Even Iam Guiding you how to do a calculation under different method.

Period Income $ Days
January 1 through April 18 142,000 108
April 19 through December 31 423,000 257
January 1 through December 31, 2017 565,000 365

A)Daily Allocation Method

on Doing daily allocation method Income distributed by multiplying Total income of year with stake of ownership and fraction of days having control.

(Here there is 3 parties each are equal shareholders ie,1/3 of company for each)

ownership*Days fraction*Total Income Income
1 Winkin (1/3ownership)*(365/365days)*565,000 188,333
2 Blinkin (1/3ownership)*(365/365days)*565,000 188,333
3 Nod (1/3ownership)*(365/365days)*565,000 188,333

Specific Allocation Method

Ownership*come for period Total
Winkin January 1 through April 18 (1/3ownership*142,000)=47,333 April 19 through December 31 (1/3ownership*423,000)=141,000 188,333
Blinkin January 1 through April 18 (1/3ownership*142,000)=47,333 April 19 through December 31 (1/3ownership*423,000)=141,000 188,333
Nod January 1 through April 18 (1/3ownership*142,000)=47,333 April 19 through December 31 (1/3ownership*423,000)=141,000 188,333

This case givening equal answers. But in different case you may use same formula and ideas to get different values.

Incases,Transfer of ownership between these parties in part way

ekkarill92 answered 1 year ago
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