Question

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

Answer 1

Answer:

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.