Question

Jose is the sole shareholder of Cram Corp., a regular C-Corporation. Janelle owns and operates a sole proprietorship. Both businesses make a profit of $80,000 and each owner withdraws $50,000 from his business. Which of the following statements is correct? Janelle must report $80,000 of income on her personal tax return. Jose must report $80,000 of income on his personal tax return. Janelle must report $50,000 on her personal tax return. Cram Corp. can deduct the $50,000 distribution to Jose. None of the statements is correct.

          Jose is the sole shareholder of Cram Corp., a regular C-Corporation. Janelle owns and operates a sole proprietorship. Both businesses make a profit of $80,000 and each owner withdraws $50,000 from his business. Which of the following statements is correct?
Janelle must report $80,000 of income on her personal tax return.
Jose must report $80,000 of income on his personal tax return.
Janelle must report $50,000 on her personal tax return.
Cram Corp. can deduct the $50,000 distribution to Jose.
None of the statements is correct.

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Added by Pedro A.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Azat Nurmukhametov

08/22/2022

Step 1

Since she operates a sole proprietorship, the business income is reported on her personal tax return. Therefore, she must report the entire profit of $80,000 on her personal tax return, regardless of the amount she withdraws. Show more…

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Jose is the sole shareholder of Cram Corp., a regular C-Corporation. Janelle owns and operates a sole proprietorship. Both businesses make a profit of $80,000 and each owner withdraws $50,000 from his business. Which of the following statements is correct? Janelle must report $80,000 of income on her personal tax return. Jose must report $80,000 of income on his personal tax return. Janelle must report $50,000 on her personal tax return. Cram Corp. can deduct the $50,000 distribution to Jose. None of the statements is correct.

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