Question

Facts: BC Business Entity, owned equally by Bernie and Carl, reported the following items during 2018: Sales revenue Interest earned on corporate bonds Interest earned on State of Tennessee bonds Dividends from 10% owned domestic corporation Cost of goods sold Operating expenses Long-term capital gain Short-term capital loss Interest on loan used to purchase State of Tennessee Bonds Salary/guaranteed payment, paid to Bernie* Distribution of profits to owner(s)** 400,000 11,000 7,000 20,000 (150,000) (84,000) 8,000 (9,000) (2,000) (25,000) (40,000) *Salary in the case of a C and S corporation, and guaranteed payment in the case of a partnership ** The distribution was paid equally to BC's owner(s) (the $40,000 was distributed $20,000 each to Bemie and Carl). The distribution is a legal dividend in the case of a corporation. BC's liabilities (all recourse) on January 1, 2018 were $80,000. BC's liabilities (all recourse) on December 31, 2018 were $90,000.

Answer 1

A. 50,000 taxable income and tax liability 15,000

B. All wages capital gains or losses, charitable contributions to be shown

C. 40,000