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Assume Carin sells her 30-percent interest in Blue S Corp, Inc. to Cami on January 16, 2022 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, 2022? o $20,000. o None of the choices are correct. o $6,000. o $6,164

Question

Assume Carin sells her 30-percent interest in Blue S Corp, Inc. to Cami on January 16, 2022 Using the daily allocation method, how much income does Carin report if Blue earned 20,000fromJanuary1toJanuary15andatotalof20,000 from January 1 to January 15 and a total of 500,000 from January 1 through December 31, 2022? o 20,000.oNoneofthechoicesarecorrect.o20,000. o None of the choices are correct. o 6,000. o $6,164

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Solution

To determine how much income Carin reports using the daily allocation method, follow these steps:

  1. Calculate the total number of days Carin owned her interest in Blue S Corp, Inc. in 2022:

    • Carin owned her interest from January 1 to January 15.
    • This is a total of 15 days.

  2. Determine the total income earned by Blue S Corp, Inc. for the entire year:

    • Blue earned a total of $500,000 from January 1 through December 31, 2022.

  3. Calculate the daily income earned by Blue S Corp, Inc.:

    • Total income for the year: $500,000
    • Total number of days in the year: 365
    • Daily income = 500,000/365=500,000 / 365 = 1,369.86 (rounded to two decimal places)

  4. Calculate the income earned by Blue S Corp, Inc. during the period Carin owned her interest:

    • Daily income: $1,369.86
    • Number of days Carin owned her interest: 15
    • Income during Carin's ownership = 1,369.86∗15=1,369.86 * 15 = 20,547.90

  5. Determine Carin's share of the income based on her 30-percent interest:

    • Carin's share = 30% of $20,547.90
    • Carin's share = 0.30 * 20,547.90=20,547.90 = 6,164.37

Since the question asks for the amount Carin reports, and the choices are rounded to the nearest dollar, the correct answer is:

$6,164

This problem has been solved

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