Question

Assume Joe Harry sells his 25 percent 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)?

a. $28,000.
b. $50,000.
c. $112,000.
d. $200,000.
e. None of the above.

Answer 1

$29,000

Step-by-step explanation:

Joe sells 25% of his interest to Joe's S corporation

= 25/100

= 0.25

Therefore using the daily allocation method, the amount of income reported if Joe earns $200,000 from January 1st to January 29th and a total of $1,460,000 for 365 days

= 1,460,000/365 days × 29 days × 0.25

= 4,000×29×0.25

= $29,000

Hence the amount of income reported by Joe Harry is $29,000