Assume Joe Harry sells his 25 percent interest in Joe's S Corp., Inc., to Tyrone on January 29.Using the daily allocation method, how much income does Joe Harry report if Joe's S Corp., Inc., earned $200,000 from January 1 to January 29 and a total of $1,460,000 from January 1 through December 31 (365 days)?

Question

Quizplus · Accepted Answer

Joe Harry's share of the income for the period he was a shareholder is calculated using the daily allocation method. The income from January 1 to January 29 is $200,000. Joe's 25% share of this is $200,000 * 25% = $50,000. However, since the question asks for the income Joe reports, we need to allocate the income based on the number of days he was a shareholder. Joe was a shareholder for 29 days, and the total income for the year is $1,460,000. The daily income is $1,460,000 / 365 = $4,000. Joe's share for 29 days is 29 * $4,000 * 25% = $29,000.

Assume Joe Harry Sells His 25 Percent Interest in Joe's