Answer:
Sports World Enterprises
Reporting of this information as:
a. A sole proprietorship:
Business income = $85,000
Long-term Capital Losses $12,000
Limit allowed for the year = $3,000
Personal Taxable Income = $82,000
b. A C-Corp:
Net operating income = $85,000
Long-term Capital Losses (LTCL) = $12,000
Corporate Taxable Income = $73,000
Personal Taxable Income = $40,000
c. An S-Corp:
Business income = $85,000
Long-term Capital Losses $12,000
Personal Taxable income = $73,000
Step-by-step explanation:
a) Data and Calculations:
Net operating income = $85,000
Long-term Capital Losses (LTCL) = $12,000
Drawings for personal use = $40,000
b) A sole proprietorship is a business entity owned by one person. It does not enjoy separate legal existence from the owner. All income from different sources are aggregated and taxed at the individual tax rate.
c) A C-Corporation is a legal entity that is separate from the owner(s). Its income is taxed at the corporate rate before distribution to the owner(s). The distributed income to the owner(s) is also taxed at the individual tax rate.
d) An S-Corporation, while it enjoys a separate legal existence, is a special form of a corporation, whereby the earnings are passed through the owners and are taxed at the individual tax rate.