Bonnie and Clyde each own one-third of a fast-food restaurant, and their 13-year
ID: 2444882 • Letter: B
Question
Bonnie and Clyde each own one-third of a fast-food restaurant, and their 13-year-old daughter owns all of the other shares. Both parents work full-time in the restaurant, but the daughter works infrequently. Neither Bonnie nor Clyde receives a salary during the year, when the ordinary income of the S corporation is $180,000. An IRS agent estimates that reasonable salaries for Bonnie, Clyde, and the daughter are $30,000, $35,000, and $10,000, respectively. As a result, enter below the amount of each shareholder's share of the S corporation's ordinary income. $?
Explanation / Answer
Profit Sharing ratio of Bonnie,Clyde and old daughter is as below
Bonnie=1/3 Clyde=1/3 and Old daughter=1/3
Ordinary Income of S Corporation $1,80,000
Ordinary Income after salary=$1,80,000-$30,000-$35,000-$10,000
=$1,05,000
Share of Shareholder is as follow
Bonnie=$35,000
Clyde=$35,000
Old Daughter=$35,000