Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2014.He also owns 60% of the stock in a C corporation that earned $150,000 during the year.The S corporation distributed $30,000 to Bjorn and the C corporation paid dividends of $30,000 to Bjorn.How much income must Bjorn report from these businesses?
A)$0 income from the S corporation and $30,000 income from the C corporation.
B)$30,000 income from the S corporation and $30,000 of dividend income from the C corporation.
C)$90,000 income from the S corporation and $0 income from the C corporation.
D)$90,000 income from the S corporation and $30,000 income from the C corporation.
E)None of the above.

Question

Quizplus · Accepted Answer

Bjorn must report his share of income from both the S corporation and the C corporation. For the S corporation, his income would be 60% of $150,000 or $90,000. Since the S corporation distributed $30,000 to Bjorn, the remaining $60,000 would be added to his income. For the C corporation, since Bjorn owns 60% of the stock, he would report 60% of the $30,000 in dividends or $18,000 income. Therefore, Bjorn must report $90,000 income from the S corporation and $18,000 income from the C corporation, for a total of $108,000 in income.

Bjorn Owns a 60% Interest in an S Corporation That