Question

The profit and loss statement of Kitsch Ltd., an S corporation, shows $100,000 book income. Kitsch is owned equally by four shareholders. From supplemental data, you obtain the following information about items that are included in book income.

Selling expenses ($21,200)
Tax-exempt interest income 3,000
Dividends received 9,000
§1231 gain 7,000
Depreciation recapture income 11,000
Net income from passive real estate rentals 5,000
Long-term capital loss (6,000)
Salary paid to owners (each) (12,000)
Cost of goods sold (91,000)
a. The entity's nonseparately stated income is $82,000.

b. The portion of nonseparately stated income or loss for James Billings, one of the Kitsch shareholders, is $20,500.

c. What is James Billings’ share of tax-exempt interest income, if any?
$

Is the income taxable to him this year?
not taxable

Answer 1

82000

$20500

$750

Not taxable

Answer 2

• $82000
• $20500
• $750
• Not taxable

Step-by-step explanation:

with the information provided

A) how the entity's non separately stated income is $82000

to calculate the non separately stated income

(Total long term stated income) - (total short term stated income)

long term stated income

book value = $100000

long term capital loss/gain = $6000

book value + long term capital loss = $106000 ( total long term stated income )

short term stated income

tax exempt = $3000

dividends = $9000

1231 gain = $7000

net passive income = $5000

total short term stated income = 3000 + 9000 + 7000 + 5000 = $24000

hence non separately stated income = $106000 - $24000 = $82000

B) To show how one of he kitsch shareholder is bearing $205000 income or loss

Number of shareholder = 4

non separately stated income = $82000

non separately stated income / number of shareholder = 82000 / 4 =$20500

C)

Tax exempt income = $3000

number of share holders = 4

hence Billings' share of tax exempt interest income = tax exempt income / number of share holders

= $3000 / 4 = $750

Billings income is not taxable this year because his taxable income this year is $20500