Problem 2224 Algorithmic LO 5 6 The profit and loss statemen

Problem 22-24 (Algorithmic) (LO. 5, 6)

The profit and loss statement of Kitsch Ltd., an S corporation, shows $125,000 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.

a. The entity\'s nonseparately stated computed is $_______________.

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

c. What is James Billings’ share of tax-exempt interest income, if any? Round your answer to the nearest value.
$____________________

Is the income taxable to him this year?
_______________(TAXABLE/NONTAXABLE)

Selling expenses	($25,000)
Tax-exempt interest income	3,750
Dividends received	11,250
§1231 gain	8,750
Depreciation recapture income	12,500
Net income from passive real estate rentals	6,250
Long-term capital loss	(7,500)
Salary paid to owners (each)	(15,000)
Cost of goods sold	(112,500)

SOLUTION

C. James Billings’ share of tax-exempt interest income:

D. The income taxable to him this year $25,625 is not taxable.

Particulars	Amount ($)
Book income	125,000
Add: Long-term capital loss	7,500
	132,500
Less: Dividends received	(11,250)
Tax-exempt interest income	(8,750)
Section 1231 gain	(3,750)
Recovery of bad debts	(6,250)
Nonseparately stated income	102,500

Problem 22-24 (Algorithmic) (LO. 5, 6) The profit and loss statement of Kitsch Ltd., an S corporation, shows $125,000 book income. Kitsch is owned equally by fo

Problem 2224 Algorithmic LO 5 6 The profit and loss statemen

Solution

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