Question

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)?

Answer 1

The answer is: $29,000

Step-by-step 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.