Question

During the current year, The Jupiter Company, which is an S corporation, had the following items of income and expenses. Jupiter Corp. has two shareholders - Anton and Becky. Anton owns 40% of the company and Becky owns 60%. Label your answers a-g.

Gross income from operations	$137,000
Gain on sale of business assets	5,000
Qualified dividend income from investments	100
Salaries to employees	65,000
Payroll taxes	6,000
Rent	7,000
Depreciation	3,500
Contributions to United Way charity	2,000
Foreign tax paid on overseas business deals	3,000
Distributions to the shareholders	40,000

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a. What is Jupiter's ordinary income? Show your work. (10 points)
b. On what line of the 2017 Form 1120S would Jupiter's ordinary income be reported (5 points)?
c. If Jupiter is on a calendar year, when is the corporation’s tax return due? (5 points)

d. List Jupiter's separately stated items and amounts. (10 points)

e. On what schedule are the separately stated items reported? (5 points)

f. List the amount that Anton would show on his tax return for the following: (10 points)

• Ordinary income
• Gain on sale of assets
• Qualified dividend income
• Charitable contributions
• Foreign tax paid

g. List the amount that Becky would show on her tax return for the following: (10 points)

• Ordinary income
• Gain on sale of assets
• Qualified dividend income
• Charitable contributions
• Foreign tax paid

Answer 1

a.

Ordinary Income = Income from Operations (-) Cost of Goods Sold (-) Operating Expenses
Jupiter's Ordinary Income
Gross income from operations		$137,000
Less:
Salaries to employees		$65,000
Payroll taxes		$6,000
Rent		$7,000
Depreciation		$3,500
Foreign tax paid on overseas business deals		$3,000
Jupiter's Ordinary Income		$52,500

b.

Jupiter's ordinary income will be reported on Line no: 21 of Form 1120S of 2017.

c.

S corporation must file Form 1120S by the 15th day of the 3rd month after the end of its tax year. For calendar year corporations, the due date is March 15, 2018.

d.

Jupiter's separately stated items and amounts
Ordinary Income	$52,500
Gain on sale of business assets	$5,000
Qualified dividend income from investments	$100
Contributions to United Way charity	$2,000
Distributions to the shareholders	$40,000

e.

In Schedule-K of Form 1120S, the separately stated items are reported.

f.

Anton Share @40%

	Amount
Ordinary Income	$21,000
Gain on sale of business assets	$2,000
Qualified dividend income from investments	$40
Contributions to United Way charity	$800
Distributions to the shareholders	$16,000

g.

Becky's share @ 60%

	Amount
Ordinary Income	$31,500
Gain on sale of business assets	$3,000
Qualified dividend income from investments	$60
Contributions to United Way charity	$1,200
Distributions to the shareholders	$24,000