Marvin and Marshall Own and Operate MM Company,an Electing S

question 52

Essay

Marvin and Marshall own and operate MM Company,an electing S corporation.Marvin owns 75% and Marshall owns 25% of MM's stock.During the current year,MM has the following results:
$\begin{array} { l r } \text { Revenues } & \$ 350,000 \\ \text { Operating expenses } & 185,000 \\ \text { Marvin's salary } & 40,000 \\ \text { Marshall's s al ary } & 85,000 \\ \text { Municipal bond interest income } & 12,000 \\ \text { Long-term capital loss } & 30,000 \\ \text { Charitable contributions } & 20,000 \end{array}$

a. How must MM report these results to Marvin and Marshall? Show calculations.


b. Marvin is a single taxp ayer with no dependents. He has total income from other sources of $\$ 68,000$ , which includes a $\$ 26,000$ long-term capital gain. He has $\$ 11,400$ of other allowable itemized deductions. Cal culate Marvin's taxable income and his income tax liability.

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