WRT, a calendar year S corporation, has 100 shares of outstanding stock. At the beginning of the year, Mr. Wallace owned all 100 shares. On September 30, he gave 25 shares to his brother and 40 shares to his daughter. WRT's ordinary income for the year was $216,000. What portion of this income must each shareholder include in income? Assume 365 days in a year

income = $215970.5

Explanation:

given data

Wallace own = 100 share

time = 273 days (1 january to 30 september)

Wallace remaining share = 100 - 40 - 25 = 35 share

time remaining = 92 days (365 - 273)

brother share = 25

time = 92 days (1 october to 31 december)

daughter share = 40

time = 92 days (1 october to 31 december)

ordinary income = $216000

to find out

income

solution

we find first ordinary income per share that will be

ordinary income per share = income / total share

ordinary income per share = 216000 / 100

ordinary income per share = $2160

and

ordinary income per share will be = 2160 / 365 = 5.917 per share per day

so

income of Wallace is

share * time period * per share per day

= 100*273 * 5.917 = $161534.1 ... 1

= 35*92 * 5.917 = $19052.74 ... 2

income of brother

share * time period * per share per day

= 25*92 * 5.917 = $13609.1 ... 3

income of daughter

share * time period * per share per day

= 40*92 * 5.917 = $21774.56 ... 4

so now income will be by adding equation 1, 2, 3 and 4

income = 161534.1 + 19052.74 + 13609.1 + 21774.56

income = $215970.5