Explanation: Owners of unincorporated entities can be either individuals or corporations.In either case, the tax year-end of the entity must match the tax year-end of the owner.
Difficulty: 2 Medium
Topic: Entity Tax Characteristics
Learning Objective: 12-03 Identify fundamental differences in tax characteristics across entity types.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective Thinking
-Roberto and Reagan are both 25-percent owner/managers for Bright Light Inc.Roberto runs the retail store in Sacramento, CA, and Reagan runs the retail store in San Francisco, CA.Bright Light Inc.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 Inc.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

As an S corporation, Bright Light Inc. passes through its income and losses to its owners based on their ownership percentage. In this case, since Roberto owns 25% of the company, he will be allocated 25% of the $125,000 profit, which is $31,250.

Explanation: Owners of Unincorporated Entities Can Be Either Individuals or Corporations.In