The business is an S corporation and T is a 50 percent owner.T is single and has no other tax information. Income from services $\quad$$\$ 100,000$
Net capital loss $\quad$2,200
Guaranteed compensation paid to $\mathrm { T } \quad 10,000$
Life insurance premium for $\mathrm { T }$,
payable to T's children $\quad$300
Other operating expenses $\quad 54,000$
Ignoring self-employment taxes, T's A.G.I, is

Question

The business is an S corporation and T is a 50 percent owner.T is single and has no other tax information. Income from services $\quad$$\$ 100,000$
Net capital loss $\quad$2,200
Guaranteed compensation paid to $\mathrm { T } \quad 10,000$
Life insurance premium for $\mathrm { T }$,
payable to T's children $\quad$300
Other operating expenses $\quad 54,000$ 
Ignoring self-employment taxes, T's A.G.I, is

Quizplus · Accepted Answer

T's Adjusted Gross Income (AGI) is calculated as follows: Income from services ($100,000) is fully included. The net capital loss of $2,200 is limited to a $3,000 deduction against ordinary income for individuals. Guaranteed compensation of $10,000 paid to T is also included in T's income. Life insurance premiums paid for T, which are payable to T's children, are not deductible by the S corporation and thus do not reduce T's income. Other operating expenses ($54,000) reduce the S corporation's income but are not directly deductible by T. T's share of the S corporation's income is 50%, so T's income from the S corporation before the guaranteed payment and net capital loss deduction is $50,000 (50% of [$100,000 - $54,000]). Adding the guaranteed payment of $10,000 and subtracting the allowed $3,000 capital loss deduction (since the actual loss is $2,200, it's fully deductible up to the $3,000 limit for individuals), T's AGI is $57,000 ($50,000 + $10,000 - $3,000). However, this calculation does not align with the provided options, indicating a need for clarification in the calculation steps based on the given options. Given the options and the typical approach to calculating AGI for an S corporation shareholder, the correct calculation would directly consider T's share of the S corporation's income, guaranteed payments, and the capital loss limitation, without directly subtracting expenses or considering the life insurance premium, as these are handled at the corporate level and affect T's distributive share. The correct AGI, based on typical tax treatment and the provided options, would involve recalculating based on the specific details given and the standard tax treatment of S corporation distributions, guaranteed payments, and capital loss deductions.

The Business Is an S Corporation and T Is a 50