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 Topic: Becker REG 2011 Exam 2 simulation ( Topic Closed)
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GVen
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Joined: 13 Apr 2011
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Posts: 71
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| Posted: 13 Feb 2012 at 01:12 | IP Logged
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Couple of questions from the simulation below.
1) Could somebody walk me through how this flows from a filing perspective? Does this all end up in Cartwright's 1040 or does the portion that is shown on the K-1 go some other form? He is employed by a C Corp which he owns, owns 50% of an S Corp, and 10% of an LLP.
2) In the answer for what he lists as interest income, the answer is $6200. But what happens to the profits of the corporation that he owns 100% of, including its $50,000 of Interest Income? Is this all on form 1120?
Brian Cartwright is a single taxpayer who itemizes deductions and has no dependents. In 20X5, he earned wages of $200,000 from Brandise Corporation, a newly-formed C Corporation of which he is the sole shareholder and only employee. Brandise is not considered to be a personal service corporation or a personal holding company.
In addition, since 20X2 Brian has owned a 50% interest in Technology Plus, Inc., an S Corporation from which he was paid a salary and received distributions in 20X5 (each paid according to the ratio of ownership). Brian is also a 10% limited partner in Wonderland Resorts, a limited liability partnership, which paid him no distributions in 20X5 and in which he had a $300,000 basis at 12/31/X4.
Technology Plus, Inc. and Wonderland Resorts, LLP each issued Brian a K-1 for the tax year 20X5 (detail provided below). Brian also received 1099s for taxable interest income from banks in the amount of $3,500 and $15,000 in gambling winnings from a casino.
In addition, Brian owns a fully-depreciated residential rental unit that had income of $25,000 and deductible expenses of $20,000. There are no passive loss carryforward amounts.
Brian made no pension or IRA contributions of any kind for the year 20X5 and does not plan to do so. He had verifiable gambling losses of $27,000 and is not considered a professional gambler. In 20X4, Brian created a long-term capital loss carryforward from the sale of stock in the amount of $35,000.
Details related to 100% of the activity in Brian’s investment holdings follows:
Brandise Corporation:
Revenues:
Operating revenue ; ; ; ; $ 250,000
Interest income 50,000
Expenses (no M-1 adjustments):
Salary 200,000
Office rental expense ; ; ; ; ;12,000
Office supplies &nbs p; &nbs p; &nbs p; &nbs p; &nbs p; &nbs p; 2,000
Utilities &nb sp; &nb sp; &nb sp; &nb sp; &nb sp; &nb sp; &nb sp; 9,000
Tax depreciation/amortization ; ; ; 4,000
Taxable net income $ 73,000
Technology Plus, Inc.:
Revenues:
Sales & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; $ 225,000
Taxable interest income 5,000
Long-term capital gains & nbsp; & nbsp; & nbsp; & nbsp; 40,000
Total revenue ; ; ; ; $ 270,000
Expenses:
Shareholder salaries &nbs p; &nbs p; &nbs p; &nbs p; 150, 000
Cost of goods sold &n bsp; &n bsp; &n bsp; &n bsp; &n bsp; 50,000
Operating expenses &nbs p; &nbs p; &nbs p; &nbs p; &nbs p; 12,000
Charitable contributions ; ; ; ; 1,000
Regular depreciation 3,000
Section 179 depreciation 6,000
Total expenses &nbs p; &nbs p; &nbs p; &nbs p; $ &nb sp; 222,000
Net income before distributions ; ; $ 48,000
Distributions to shareholders $ ; (20,000)
Wonderland Resorts, LLP:
Revenues:
Rental real estate income $ 100,0 00
Taxable interest income 2,000
Total revenues &nbs p; &nbs p; &nbs p; &nbs p; &nbs p; 102,000
Expenses:
Rental real estate expenses &nbs p; &nbs p; &nbs p; &nbs p;90,000
Regular depreciation on rental units & nbsp; & nbsp; 70,000
Total expenses &nbs p; &nbs p; &nbs p; &nbs p; &nbs p; 160,000
Net loss &n bsp; &n bsp; &n bsp; &n bsp; &n bsp; &n bsp; $ (58,000)
Calculate the following items for Brian's 1040 for Year 4:
1) Wages and Salaries $275,000 ($200K + 50% of $150K)
2) Capital Gain / Loss: ($3,000)
3) Income from Real Estate: $1,000
Net Rental $5K + Technology Plus Inc $10K x 50% - Section 179 expense $6K x 50% - Wonderland Resorts $6K
__________________
FAR 8/2011: 86
AUD 11/2011: 93
Reg 2/2012: 71, 7/1/2012: 89
BEC 10/2012: TBD
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musicamor04
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Joined: 05 Oct 2011
Location: United States
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Posts: 155
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| Posted: 13 Feb 2012 at 12:09 | IP Logged
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GVen--
It's hard for me to see the numbers you pasted in as they're all coming up as "&nbs p" symbols.
I will say this: C Corps are not pass-through entities so there would be no form on which the net profit is reported to the shareholder's, nor are there any seperately stated items.
For the S-Corp and the LLP, the net profits as well as seperate stated items (to the extent of ownership %, and basis if we're talking losses) are reported to the owner on form K-1; and the K-1 is included on schedule E (I think) of the individual's 1040.
Does that help?
__________________
BEC - (65, 75, lost credit re-take May 30, 2012)
FAR - (42, 60, 64, 76)
AUD - (63, 87)
REG - (70, 58, 50 69, 70, 88--FINALLY!!)
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