Bashir and Manuela are sole shareholders of Red Corp., an S corporation. Red Corp. had the following
Question:
Gross receipts: | $1,000,000 | |
Cost of goods sold: | $300,000 | |
Municipal bond interest: | $5,000 | $2,750 in first 200 days; $2,250 after |
Short-term capital gain: | $12,000 | stock sold on Dec. 1 |
Long-term capital loss: | $3,000 | stock sold on March 1 |
Compensation: | $50,000 | |
Utilities: | $20,000 | |
Advertising: | $8,000 | |
Charitable contribution: | $10,000 | donation made Feb. 1 |
a) If Bashir owed 30% of Red Corp. for all of 2020, what amount of ordinary income (or loss) is allocated to Bashir?
b) If Bashir owned 30% of Red Corp. for the first 200 days of 2020 (assume 2020 had 365 days total - ignore the leap year) and then sold all of his shares to Manuela, what amount of ordinary income is allocated to Bashir? Assume no interim closing of the books. Round your answer to the nearest whole dollar.
c) If Bashir owned 30% of Red Corp. for the first 200 days of 2020 (assume 2020 had 365 days total - ignore the leap year) and then sold all of his shares to Manuela, what amount of short-term capital gain is allocated to Bashir? Assume no interim closing of the books. Round your answer to the nearest whole dollar.
d) If Bashir owned 30% of Red Corp. for the first 200 days of 2020 (assume 2020 had 365 days total - ignore the leap year) and then sold all of his shares to Manuela, what amount of long-term capital loss is allocated to Bashir for 2020? Assume a short-year election was made when Bashir sold his shares of Red Corp.
Cornerstones of Financial and Managerial Accounting
ISBN: 978-0324787351
1st Edition
Authors: Rich Jones, Mowen, Hansen, Heitger