1 answer

Facts: BC Business Entity, owned equally by Bernie and Carl, reported the following items during 2018:...

Question:

Facts: BC Business Entity, owned equally by Bernie and Carl, reported the following items during 2018: Sales revenue Interest
Calculate BCs taxable income and income tax liability if BC is taxed as a C corporation? Clearly show your work and label yo
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.
Calculate BC's taxable income and income tax liability if BC is taxed as a C corporation? Clearly show your work and label your answer. Assume that Bernie and Carl each have a $40,000 basis in their BC stock on January 1, 2018, and that BC is taxed as a C corporation. What amount and type (if any) of income, loss, or deduction items must Carl report on his individual tax return as a result of his investment in BC Corporation? Clearly show your work and label your answer. What is Carl's basis in his BC stock at the end of the year (12/31/18)? Clearly show your work and label your answer. What is Carl's self-employment income (if any) as a result of his ownership of BC business entity? Clearly show your work and label your answer.

Answers

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

.

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