Alabaster Company is a Subchapter S corporation.It properly reported net income of $250,000 for financial statement purposes.It had net capital gains of $60,000 and charitable contributions of $20,000.What is the ordinary business income loss)of Alabaster Company that will be reported to its shareholders on Schedule K-1?

Question

Quizplus · Accepted Answer

The calculation of ordinary business income (or loss) for a Subchapter S corporation starts with the corporation's taxable income determined under the tax laws. In this case, there are two adjustments: subtracting the net capital gains and adding back the charitable contributions because they are not deductible for tax purposes by the corporation.

So, Alabaster Company's ordinary business income would be:
Taxable income = $250,000
Less: Net capital gains = $60,000
Add: Charitable contributions = $20,000
Ordinary business income = $210,000

Therefore, the correct answer is B, $210,000.

Alabaster Company Is a Subchapter S Corporation