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30 May, 20:49

Assume Joe Harry sells his 25% interest in Joe's S Corp., Inc. to Tyrone on January 29. Using the daily allocation method, how much income does Joe Harry report if Joe's S Corp., Inc. earned $200,000 from January 1 to January 29 and a total of $1,460,000 from January 1 through December 31 (365 days) ?

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  1. 30 May, 21:17
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    The answer is: $29,000

    Explanation:

    We first need to calculate Joe's S Corp.'s daily revenue:

    daily revenue = total revenue for the year / 365 days

    daily revenue = $1,460,000 / 365 = $4,000

    Since Joe owned 25% of Joe's Corp., $1,000 ($4,000 x 25%) of the daily revenue belongs to Joe.

    Joe should report 29 days of daily revenue, equivalent to $29,000.
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