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23 October, 22:01

Barbara owns 40% of the stock of cassowary corporation (a c corporation) and 40% of the stock of emu corporation (an s corporation). in the current year, each corporation has operating income of $120,000 and tax-exempt interest income of $8,000. neither corporation pays any dividends during the year. discuss how this information will be reported by the corporations and barbara for the year.

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  1. 23 October, 22:14
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    Since C corporations are separable tax entities, Cassowary Corporation will report the operating income and tax-exempt income. An S corporation is a tax reporting entity. Therefore, Barbara will report ordinary business income of $48000 (120000*40%) and tax-exempt interest income of $3200 ($8000*40%) on her individual return.
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