Roberto and Reagan are both 25-percent owner/managers for Bright Light Incorporated. Roberto runs the retail store in Sacramento, California, and Reagan runs the retail store in San Francisco, California. Bright Light Incorporated generated a $125,000 profit companywide made up of a $75,000 profit from the Sacramento store, a ($25,000)loss from the San Francisco store, and a combined $75,000 profit from the remaining stores. If Bright Light Incorporated is an S corporation, how much income will be allocated to Roberto?
A)$31,250
B)$62,500
C)$75,000
D)$125,000

Question

Quizplus · Accepted Answer

Roberto's income allocation is based on his 25% ownership in the S corporation. The total companywide profit is $125,000. Since S corporation profits are passed through to the owners based on their ownership percentage, Roberto's share is 25% of $125,000, which equals $31,250.

Roberto and Reagan Are Both 25-Percent Owner/managers for Bright Light