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The profit and loss statement of Kitsch Ltd., an S corporation, shows $100,000 book income. Kitsch...

The profit and loss statement of Kitsch Ltd., an S corporation, shows $100,000 book income. Kitsch is owned equally by four shareholders. From supplemental data, you obtain the following information about items that are included in book income.

Selling expenses ($21,200)
Tax-exempt interest income 3,000
Dividends received 9,000
§1231 gain 7,000
Depreciation recapture income 11,000
Net income from passive real estate rentals 5,000
Long-term capital loss (6,000)
Salary paid to owners (each) (12,000)
Cost of goods sold (91,000)

a. The entity's nonseparately stated income is $82,000.

b. The portion of nonseparately stated income or loss for James Billings, one of the Kitsch shareholders, is $20,500.

c. What is James Billings’ share of tax-exempt interest income, if any?
$

Is the income taxable to him this year?
not taxable

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Answer

A. Book income           $100,000
Add: Long-term capital loss    $6,000
                                         $106,000
Less:
Dividends received                  $9,000
Tax-exempt interest income      3,000
Section 1231 gain                    7,000
Recovery of bad debts              5,000 (24,000)
Nonseparately stated income             $ 82,000

B. portion of nonseparately stated income or loss for James Billings, one of the Kitsch shareholders, is $20,500 ($82,000 ÷ 4).

C.James Billings’ share of tax-exempt interest income:

3000/4 =$750

D.

The income taxable to him this year $20,500 is not taxable.

ekkarill92 answered 1 year ago
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