Assume Joe Harry sells his 25percent interest in Joe's S Corporation, to Tyrone on January 29. Using the daily allocation method, how much income does Joe Harry report if Joe's S Corporation,earned $265,000 from January 1 to January 29 and a total of $3,832,500 from January 1 through December 31 (365 days)?

Question

Quizplus · Accepted Answer

To calculate the amount of income that Joe Harry reports using the daily allocation method, we first need to determine the number of days that he owned his interest in the S Corporation. Since he sold his interest on January 29, he owned his interest for 29 days out of the total 365 days in the year.

Next, we calculate Joe's daily income by dividing the total income for the year by 365 days:

$3,832,500 ÷ 365 = $10,500 per day

To determine Joe Harry's income, we multiply the daily income by the number of days he owned his interest in proportion to the total number of days in the year:

($10,500 per day x 29/365) x 25% = $76,125

Therefore, Joe Harry reports $76,125 in income from his sale of the 25% interest in Joe's S Corporation. Answer choice A is correct.

Assume Joe Harry Sells His 25percent Interest in Joe's S