Question

What method is used to allocate S corporation income or losses (unless an election to the contrary is made)?

1) Any method agreed to by all of the shareholders.
2) FIFO method.
3) Per-day allocation.
4) LIFO method.

Answer 1

The method used to allocate S corporation income or losses (unless an election to the contrary is made) is any method agreed to by all of the shareholders.

Step-by-step explanation:

The method used to allocate S corporation income or losses (unless an election to the contrary is made) is Any method agreed to by all of the shareholders.

This means that the shareholders of the S corporation can decide on a specific method to allocate the income or losses among themselves. They can agree on a distribution formula that is fair and suitable for their specific circumstances.

For example, they might agree to allocate the income or losses based on the percentage of ownership each shareholder has in the company. Or they could agree to allocate them in a different manner, such as based on the amount of capital each shareholder has invested in the company.