Back to App Store 9:20 PM The company FPA has the following income, expense, and
ID: 2426235 • Letter: B
Question
Back to App Store 9:20 PM The company FPA has the following income, expense, and loss items for the current vear: Sales $850,000 Tax-exempt interest $40,000 Long-term capital gain $85,000 Short-term capital loss $35,000 Passive activity loss $20,000 Cost of goods sold $480,000 Depreciation $40,000 Section 179 expense $50,000 Other operating expenses $200,000 Net operating loss (from previous year) $24,000 Prepare a calculation of taxable income for the following scenarios and indicate the tax form(s) to report the business activity Sole proprietorship Partnership equally owned by Vinnie and Chandra Corporation owned by Kim S corporation owned equally by Henry, Iris, and JasmineExplanation / Answer
sales:850,000
cogs:(480,000)
depreciation:(40,000)
section 179 expenses:(50,000)
other operating expenses:(200,000)
Operating income:80,000
Calvin will include the $80,000 of operating income from the sole proprietorship on his individual return. The capital gains and losses must be netted with any other capital gains and losses Calvin has for the year. The passive activity loss is subject to the passive loss rules (losses deductible to the extent of passive income). The net operating loss carryforward is deductible for adjusted gross income to the extent of Calvin's business income for the year. The tax- exempt interest is reported on his individual return, but is excluded from gross income
b)
sales:850,000
cogs:(480,000)
depreciation:(40,000)
other operating expenses:(200,000)
Operating income:130,000
Vinnie and Chandra will each report one-half of the partnership's operating income and separately stated items on their individual returns:
Vinnie Chandra:
Operating income ($130,000 x 1/2) =$65,000
Tax-exempt interest ($40,000 x 1/2)=($20,000)
Long-term capital gain ($85,000 x 1/2)=$42,500
Long-term capital gain ($35,000 x 1/2)=($27,500)
net=$60,000
the above is individually for both
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