Tracy is the owner of a closely held S-Corporation that specializes  in web design services. He is a 50% shareholder and his brother Thomas owns the other 50%. Tracy and Thomas are both graphic artists and spend their time designing websites as well as handling the day-to-day operations of the company. Although he is not an accountant, Thomas handles the accounting functions of the company. Thomas brings the books and records to Joe's Tax Service each year to have the tax returns prepared for the company. Tracy has always just signed the returns but never really looked at them. Tracy calls you and wants to schedule an appointment with you, without Thomas being present. He wants to discuss the financial statements  and the tax returns. He doesn't understand why the net income is different on the tax return. He thinks his brother is playing some tricks with the books. What will you tell him?

Answer rating: 100% (QA)

Net income and taxable income Explanation A partnership exist between Tracy and Thomas where they op... View the full answer