## Question

###### Question 2 (3 points) Mohamed owns 25% of Red Corp, an S-corporation. In 2019, Red Corp...

Question 2 (3 points) Mohamed owns 25% of Red Corp, an S-corporation. In 2019, Red Corp earned $100,000 of taxable income and distributed a total of $60,000 to its shareholders. Mohamed also owns 30% of Blue Corp. a C-corporation. In 2019, Blue Corp earned taxable income of $100,000 and paid a total of $50,000 in dividends to its shareholders. How much income must Mohamed include in his gross income as a result of being a shareholder in these two corporations? a) $30,000 b) $45,000 c) $40,000 d) $50,000 Oe) $55,000 by

## Answers

Step - (1) - Information Given -Mohamed owns

25%of Red Corp, an. In 2019, Red Corp earned $100000 of taxable income andS-corporationdistributed a total of $60000 to its shareholders.Mohamed also owns

30%of Blue Corp. aIn 2019, Blue Corp earned taxable income of $100000 and paid a total ofC-corporation.to its shareholders.$50000 in dividends.

Step - (2) - Calculation of amount to be included in the gross income of Mohamed -

ExplanationAmountI.Distribution of income by Red Corp. $60000 * 25% $15000 II.Distribution of dividends by Blue Corp. $50000 * 30% $15000 Amount to be included in the gross income of MohamedI + II $30000Hence,

Option - (a)isCorrect.

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