Reference no: EM132648535
Problem - The profit and loss statement of Kitsch Ltd., an S corporation, shows $100,000 book income. Kitsch is owned equally by four shareholders. From supplemental data, you obtain the following information about items that are included in book income.
Selling expenses ($21,200)
Tax-exempt interest income 3,000
Dividends received 9,000
§ 1231 gain 7,000
Depreciation recapture income 11,000
Net income from passive real estate rentals 5,000
Long-term capital loss (6,000)
Salary paid to owners (each) (12,000)
Cost of goods sold (91,000)
Required -
a. Compute Kitsch's nonseparately stated income or loss for the tax year.
b. What would be the share of this year's nonseparately stated income or loss items for James Billings, one of the Kitsch shareholders?
c. What is James Billings's share of tax-exempt interest income, if any? Is the income taxable to him this year?