[Lou]

I was doing a problem and came across where they used interest expense to arrive at ordinary income for an s-corp. I thought this was seperately stated and would be passed along to the shareholders? Can someone help explain this?

FAR- taken 8/11/16....now the wait begins
AUD- scheduled 9/8/16
BEC- scheduled 10/9/16
REG-scheduled 12/10/16

Live a few years like most people won't, to live the rest of your life like most people can't.

[Hurricane]

I don't think interest expense is a separately stated item. I think it is considered to be an ordinary business expense. I do think interest income is separately stated because it is considered passive income. Someone please correct me if I'm wrong.

AUD - 96
BEC - 88
FAR - 88
REG - TBS

[ITSTIMETOPASS]

I'm not sure about your answer but I do have a question for you @lblacker.

I saw you got a 94 on FAR. I was just wondering how long you studied for it, what materials did you use, and what was your study routine like?

FAR is giving me a lot of trouble.

AUD: PASSED!
REG: Q4 2015
FAR:
BEC:

[Lou]

@hurricane that makes a lot of sense. So the income received is separately stated but the expense is included in ordinary income.

@kbshah, I studied for 7 weeks using Becker. They key for me was writing everthing down. My philosophy on a chapter goes like this:

1. Watch the video lecture (jotting down the things they tell you too in the book)
2. take notes on one section in the chapter
3. do problems for that section (write down each answer choice in notebook so it sticks in my head)
4. once i've done this for every problems, I go back again and look at the notes/usually type them now since it takes too long to write.
5. go back and do problems again, writing the tidbits i need to remember in my actual book for review.
6. repeat

Going back and re-typing the notes/doing the problems again right away really helped. The first time through you're just kindof learning how to do the problem given the framework of criteria. The second time you may remember the answer but you now understand how they actually got there.

It's tedious but writing the answers down was the way to make sure I was actively learning and not just clicking on answer choices and reading the answer given.

FAR- taken 8/11/16....now the wait begins
AUD- scheduled 9/8/16
BEC- scheduled 10/9/16
REG-scheduled 12/10/16

Live a few years like most people won't, to live the rest of your life like most people can't.

[ITSTIMETOPASS]

Thanks lblacker for your feedback! I've been writing answers I got wrong so hopefully that'll help.

Good luck on your last exam!

AUD: PASSED!
REG: Q4 2015
FAR:
BEC:

[neaux]

Interest expense is an expense to the company in order to make an income/profit. Poorly worded, but you get the idea. Think about how interest expense is derived. Interest expense usually comes from debt taken on to help the company operate effectively, therefore, it’s an ordinary/necessary business expense. Interest income, on the other hand, usually comes from an investment which is separate from the company’s principal business.

This is my understanding. Hope it helps. Another way I like to think about it is, if it would be considered a gain/loss as opposed to revenue/expense, or it’s not a part of the principal operations (Charitable contributions, for example) then it is most likely separately stated. This is because each shareholder have different tax treatments and limitations.

[justicebeaver]

@lblacker – agreed with the others that interest income is separately stated but interest expense is ordinary income. Take a look at any Sch K or K-1 to determine. I always get the two mixed up! (Thank you @neaux2135 for the explanation)

https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf

[Author]

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