Question

Robert is the sole shareholder and CEO of ABC, Inc., an S corporation that is a qualified trade or business. During the current year, ABC records net income of $266,000 after deducting Robert's $79,800 salary. In addition to his compensation, ABC pays Robert dividends of $186,200. a. What is Robert's qualified business income?

Would your answer to part (a) change if you determined that reasonable compensation for someone with Robert's experience and responsibilities is $169,800?

Answer 1

Solution -

Robert Qualified Business Income -

Robert is the sole shareholder and CEO of ABC Inc. and he has earned an income of $266,000. Hence Considering the same Robert Qualified business income will be $266,000.

Change if you determined that reasonable compensation for someone with roberts experience and reponsibilities is $169,800.

Hence in the current scenario as ABC Inc has earned a net income of $266,000 and now if ABC Inc have to pay that amount to $169,800. Hence in that case the net income will be

Net Income - $266,000

Compensation paid - $169,800

Net Income - $ 96,200.