Owen and Jessica own and operate an S corporation.Each is a 50% owner.The business reports the following results: $\begin{array}{lll}
\text {Business revenue }&\$225,000\
\text {Business expenses }&88,000\
\text {Investment expenses }&16,000\\end{array}$
How do Owen and Jessica report these items for tax purposes?
A)$68,500 income on Schedule E;$16,000 investment expense on Schedule D
B)$68,500 income on Schedule E;$8,000 investment expense on Schedule A
C)$137,000 income on Schedule E;$88,000 investment expense on Schedule A
D)$225,000 income on Schedule E;$16,000 investment expense on Schedule A

Question

Owen and Jessica own and operate an S corporation.Each is a 50% owner.The business reports the following results: $\begin{array}{lll}
\text {Business revenue }&\$225,000\
\text {Business expenses }&88,000\
\text {Investment expenses }&16,000\\end{array}$
 How do Owen and Jessica report these items for tax purposes?
A)$68,500 income on Schedule E;$16,000 investment expense on Schedule D
B)$68,500 income on Schedule E;$8,000 investment expense on Schedule A
C)$137,000 income on Schedule E;$88,000 investment expense on Schedule A
D)$225,000 income on Schedule E;$16,000 investment expense on Schedule A

Quizplus · Accepted Answer

Owen and Jessica would each report their share of the S corporation's income on Schedule E. The business income is calculated by subtracting business expenses from business revenue, which is $225,000 - $88,000 = $137,000. Since they are 50% owners, each would report $68,500 ($137,000 * 50%) on Schedule E. Investment expenses are reported differently, and since they are personal expenses, they would be reported on Schedule A. However, the total investment expense is $16,000, so each would report half of this amount, which is $8,000, on Schedule A.