Lan Corp., an accrual-basis calendar-year repair service corporation, was formed

Question

Lan Corp., an accrual-basis calendar-year repair service corporation, was formed and began business on January 6, 20x1. Lan’s valid S corporation election took effect retroactively on January 6, 20x1. For the following problems, determine the amount, if any, using the fact pattern ofr each item..

1. Assume the following facts:
- Lan’s 20x1 books recorded the following items:
- Gross receipts : $7,260
- Interest income on investments : 50
- Charitable contributions : 1,000
- Supplies : 1,120

What amount of net business income should Lan report on its 20x1 Form 1120S, US Income Tax Return for an S corporation, Schedule K?

Explanation / Answer

The term "S corporation" means a "small business corporation" which has made an election under § 1362(a) to be taxed as an S corporation. A small business corporation is an "eligible" domestic corporation (or limited liability company or partnership) that does not:

                                      Lan Corp. Net Business Income

Gross Receipts                                                           $7,260

LESS: SUPPLIES                                                         $1120
ADD   - Interest income on investments                             50

DEDUCTIONS                    
- Charitable contributions:                                           $ 1,000
                                      

NET BUSINESS INCOME                                              $5,190

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