Ms.Watts owns stock in two S corporations,MKP Corporation and Reynolds Inc.This year,Ms.Watts had the following income and loss items. If Ms.Watts materially participates in the business of both corporations,compute her AGI.

Question

Ms.Watts owns stock in two S corporations,MKP Corporation and Reynolds Inc.This year,Ms.Watts had the following income and loss items.  If Ms.Watts materially participates in the business of both corporations,compute her AGI.

Quizplus · Accepted Answer

From the given information, we can see that Ms. Watts owns stock in two S corporations and materially participates in the business of both corporations.

First, we need to compute her income and losses from each corporation separately:

- From MKP Corporation:

- Ms. Watts had ordinary income of $30,000 
  - Ms. Watts had a capital loss of ($20,000)

Therefore, her net income from MKP Corporation is: 
  $30,000 - $20,000 = $10,000

- From Reynolds Inc:

- Ms. Watts had ordinary income of $80,000 
  - Ms. Watts had a capital loss of ($10,000)

Therefore, her net income from Reynolds Inc is: 
  $80,000 - $10,000 = $70,000

To compute her AGI, we need to add up her net income from each corporation:

AGI = $10,000 + $70,000 = $80,000

Therefore, the correct answer is (C) $127,700.

MsWatts Owns Stock in Two S Corporations,MKP Corporation and Reynolds