Grams, Inc., a calendar year S corporation is a manufacturer of widgets. Grams reports $20,000 DPGR and $15,000 of wages; its S corporation's QPAI is $5,000. Janet owns a 40% interest in the S corporation. All expenses that reduce DPGR are from wages, and all wages paid relate to DPGR. How much QPAI and wages are allocated to Janet?

Question

Quizplus · Accepted Answer

To determine Janet's allocated QPAI and wages, we first need to multiply the S corporation's QPAI by her ownership percentage (40%): $5,000 x 40% = $2,000. This is the amount of QPAI allocated to Janet.

Next, we need to determine the amount of wages allocated to Janet. We can do this by multiplying the total wages by Janet's ownership percentage: $15,000 x 40% = $6,000.

Therefore, the answer is B: $2,000 QPAI and $6,000 wages are allocated to Janet.