Question

Required information (The following information applies to the questions displayed below.) art 1 of 3 Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed below, how much income should each report from SleepEZ for 2019 under both the daily allocation and the specific identification allocation method? Refer to the following table for the timing of SleepEZ's income. 55 Period January 1 through April 13 (103 days) April 14 through December 31 (262 days) January 1 through December 31, 2019 (365 days) Income $ 217.000 386.000 $ 603,000 eBook (Do not round Intermediate calculations. Round your final answers to the nearest whole dollar amount.) Print

Answer 1

Winkin, Blinkin and Nod Requirement a In this case, because there was no change in ownership, there is no need to apply an allocation method (both give the same result). Each shareholder will report $201,000 of income ($603,000 total income for year x 1/3 ownership) Requirement b Daily Allocation Method: Winkin $201,000; (1/3 ownership x 365/365 days x $603,000 income) Blinkin $56,721 (1/3 ownership x 103/365 days x $603,000 income) Nod $345,279 ($201,000 (1/3 ownership x 365/365 days x $603,000 income) + $144,279 (1/3 ownership acquired x 262/365 days x $603,000 income)] Specific Identification Method: Winkin $201,000 (1/3 ownership x 217,000) + (1/3 ownership x 386,000) Blinkin $72,333 (1/3 ownership x $217,000) + (0/3 ownership x $386,000) Nod $329,667 (1/3 ownership < $217,000) + (2/3 ownership x $386,000) Requirement Daily Allocation Method: Winkin $56,721 (1/3 ownership x 103/365days x $603,000) Nod $56,721 (1/3 ownership x 103/365days x $603,000) Blinkin $491,211 (1/3 ownership x 103/365 days x $603,000) + (3/3 ownership x 263/365 days x $603,000) Actual Allocation Method: Winkin $72,333 (1/3 ownership x $217,000) Nod $72,333 (1/3 ownership x $217,000) Blinkin $458,333 (1/3 ownership x $217,000+(3/3 ownership x $386,000)