Question

Manuel and Fernando own and operate an electronics store, Electronica, as an S corporation. Manuel owns 70%, and Fernando owns 30%. For the current year, the store reports the following: Sales revenue $1,000,000 8,000 Long-term capital gains Business expenses (840,000) Charitable contributions Non-deductible expenses (9,000) (4,000) (15,000) $140,000 Short-term capital losses Operating income a. How must Electronica report its results to Manuel and Fernando for tax purposes? Manuel Fernando Taxable ordinary income $ $ Long-term capital gain Short-term capital loss 112,000 5,600 -10,500 6,300 ✓ 2,800 48,000 2,400 -4,500 2,700 ✓ 1,200 Charitable contributions Non-deductible expenses Feedback Check My Work Conduit entities report some income items separately to the partner or shareholder because they are subject to special tax rules. b. In addition to the income and deductions from Electronica, Manuel is married and has interest and dividend income of $3,500, long-term capital gain of $1,500, and other itemized deductions of $14,500. What is his taxable income? His taxable income is $ 91,700 X.

Please help solving (b)

Answer 1

Taxable ordinary income	112000
+ interest and dividend income	3500
- short term loss deduction	(3000)
AGI	112500
Greater of standard deduction or itemized deduction; 24400 or 23500	(24400)
Taxable income	$88100

Short term capital loss after netting = 10500-(5600+1500) = 3400 (Deduction allowed up to $3000)

Itmeized deduction = 14500+9000 = 23500