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28 January, 08:44

Evan, an individual, has a 40% interest in EF, an S corporation. At the beginning of the year, Evan's basis in EF was $2,000. During the year, EF distributed $100,000 and reported operating income of $200,000. What amount should Evan include in gross income

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  1. 28 January, 11:10
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    Evan should include $80,000 in gross income

    Explanation:

    As per given data

    Evan Interest = 40%

    Operating income = $200,000

    Evan's Basis = $2,000

    Gross income is the income that is used for the calculation of tax, So, the interest of in S corporation will decide the gross income.

    Gross income for Evan = $200,000 x 40%

    Gross income for Evan = $80,000

    Evan's Basis will be used for the calculation of tax value not for gross income.
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