Janice is the sole owner of Catbird Company. In the current year, Catbird had operating income of $100,000, a long-term capital gain of $15,000, and a charitable contribution of $5,000. Janice withdrew $70,000 of profit from Catbird. How should Janice report this information on her individual tax return if Catbird Company is: An LLC? An S corporation? A C corporation?

Question

11-05-2021
Business

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Janice is the sole owner of Catbird Company. In the current year, Catbird had operating income of $100,000, a long-term capital gain of $15,000, and a charitable contribution of $5,000. Janice withdrew $70,000 of profit from Catbird. How should Janice report this information on her individual tax return if Catbird Company is: An LLC? An S corporation? A C corporation?

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2021-05-14T07:14:49+02:00

Answer:

A. LLC

Operating income $100,000

Long-term Capital Gain $15,000

Charitable contribution $5,000

No Effect $70,000

b. S corporation

Operating income $100,000

Long-term Capital Gain $15,000

Charitable contribution $5,000

No Effect $70,000

C. C corporation

Taxable income $110,000

Dividend income $70,000

Explanation:

a. An LLC

Based on the information given She will report the OPERATING INCOME of the amount of $100,000 Schedule C.

LONG-TERM CAPITAL GAIN Schedule D of the amount of $15,000.

Thirdly in a situation where she itemizes, the amount of $5,000 which represent charitable contribution (Schedule A) will be on her tax return

Lastly the amount of $70,000 which represent the amount withdrew from profit would have no effect on her individual tax return.

b. S corporation

Based on the information given she will report the OPERATING INCOME of the amount of $100,000 Schedule E.

LONG-TERM CAPITAL GAIN Schedule D of the amount of $15,000.

Thirdly in a situation where she itemizes, the amount of $5,000 which represent CHARITABLE CONTRIBUTION (Schedule A) will be on her tax return

Lastly the amount of $70,000 which represent the amount withdrew from profit would have no effect on her individual tax return.

c. C corporation

Based on the information given the TAXABLE INCOME of the amount of $110,000 calculated as ($100,000+$15,000-$5,000) will be reported by Catbird Company on FORM 1120 while Janice on the other hand will have to report DIVIDEND INCOME Schedule B of the amount of $70,000 on her tax return.