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17 April, 23:51

WRT, a calendar year S corporation, has 100 shares of outstanding stock. At the beginning of the year, Mr. Wallace owned all 100 shares. On September 30, he gave 25 shares to his brother and 40 shares to his daughter. WRT's ordinary income for the year was $216,000. What portion of this income must each shareholder include in income? Assume 365 days in a year

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  1. 18 April, 00:39
    0
    income = $215970.5

    Explanation:

    given data

    Wallace own = 100 share

    time = 273 days (1 january to 30 september)

    Wallace remaining share = 100 - 40 - 25 = 35 share

    time remaining = 92 days (365 - 273)

    brother share = 25

    time = 92 days (1 october to 31 december)

    daughter share = 40

    time = 92 days (1 october to 31 december)

    ordinary income = $216000

    to find out

    income

    solution

    we find first ordinary income per share that will be

    ordinary income per share = income / total share

    ordinary income per share = 216000 / 100

    ordinary income per share = $2160

    and

    ordinary income per share will be = 2160 / 365 = 5.917 per share per day

    so

    income of Wallace is

    share * time period * per share per day

    = 100*273 * 5.917 = $161534.1 ... 1

    = 35*92 * 5.917 = $19052.74 ... 2

    income of brother

    share * time period * per share per day

    = 25*92 * 5.917 = $13609.1 ... 3

    income of daughter

    share * time period * per share per day

    = 40*92 * 5.917 = $21774.56 ... 4

    so now income will be by adding equation 1, 2, 3 and 4

    income = 161534.1 + 19052.74 + 13609.1 + 21774.56

    income = $215970.5
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