Question

Assume Carin sells her 30-percent interest in Blue S Corp, Inc. to Cami on January 16, 2019. Using the daily allocation method, how much income does Carin report if Blue earned $20,000 from January 1 to January 15 and a total of $500,000 from January 1 through December 31, 2019

Answer 1

Answer:

$6,164

Explanation:

Given that,

Interest rate = 30%

Income earned from January 1 to January 15 = $20,000

Total income earned from January 1 through December 31, 2019 = $500,000

Therefore, the income does Carin report is calculated as follows:

= Total income × Time period × Interest rate

= $500,000 × (15 days ÷ 365 days) × 30%

= $500,000 × 0.041 × 0.3

= $6,164.38 or $6,164