Question

Dion, a shareholder, owned 20% of MedowBrook’s stock for 292 days and 25% for the remaining 73 days in the year. Using the per-day allocation method, compute Dion’s share of the following S corporation items.

Schedule K Totals Dion's Schedule K-1 Totals
Ordinary Income $60,000 $____________
Tax-exempt interest $1,000 $___________
Charitable contributions $3,400 $__________

Answer 1

Ordinary Income allocation $12,600

Tax-exempt interest allocation$210

Charitable contribution allocation $714

Step-by-step explanation:

Ordinary Income allocation:

For 20% ownership: $60,000 * [20% * (292/365)] = 9,600

For 25% ownership: $60,000 * [25% * (73/365)] = 3,000

Total 9,600 + 3,000 = $12,600

Tax-exempt interest allocation:

For 20% ownership: $1,000 * [20% * (292/365)] = 160

For 25% ownership: $1,000 * [25% * (73/365)] = 50

Total 160 + 50 = $210

Charitable contribution allocation:

For 20% ownership: $3,400 * [20% * (292/365)] = 544

For 25% ownership: $3,400 * [25% * (73/365)] = 170

Total 544 + 170 = $714