Question

Jacob is a member of WCC (an LLC taxed as a partnership). Jacob
was allocated $150,000 of business income from WCC for the year.
Jacob’s marginal income tax rate is 37 percent. The business
allocation is subject to 2.9 percent of self-employment tax and 0.9
percent additional Medicare tax. **(Round your intermediate
calculations to the nearest whole dollar amount.)**

**b.** What is the amount of tax Jacob will owe on
the income allocation if the income is qualified business income
(QBI) and Jacob qualifies for the full QBI deduction?

Answer #1

Jacob is a member of WCC (an LLC taxed as a partnership). Jacob
was allocated $150,000 of business income from WCC for the year.
Jacob’s marginal income tax rate is 37 percent. The business
allocation is subject to 2.9 percent of self-employment tax and 0.9
percent additional Medicare tax. (Round your intermediate
calculations to the nearest whole dollar amount.)
a. What is the amount of tax Jacob will owe on
the income allocation if the income is not qualified business...

MacKenzie is considering conducting her business, Mac561, as
either a single-member LLC or as an S corporation. Assume her
marginal ordinary income tax rate is 37 percent, her marginal FICA
rate on employee compensation is 1.45 percent, her marginal
self-employment tax rate is 2.9 percent, and any employee
compensation or self-employment income she receives is subject to
the 0.9 percent additional Medicare tax. Also, assume Mac561
generated $200,000 of business income before considering the
deduction for compensation Mac561 pays to...

10. Mackenzie is considering conducting her business, Mac561, as
either a single member LLC or as an S corporation. Determine
Mackenzie’s after-tax cash flow from the entity’s business income
and any compensation she receives from the business assuming her
marginal ordinary income tax rate is 37 percent, her marginal FICA
rate on employee compensation is 1.45 percent, her marginal
self-employment tax rate is 2.9 percent, and any employee
compensation or self-employment income she receives is subject to
the .9 percent...

Mackenzie is considering conducting her business, Mac561, as
either a single member LLC or as an S corporation. Determine
Mackenzie’s after-tax cash flow from the entity’s business income
and any compensation she receives from the business assuming her
marginal ordinary income tax rate is 37 percent, her marginal FICA
rate on employee compensation is 1.45 percent, her marginal
self-employment tax rate is 2.9 percent, and any employee
compensation or self-employment income she receives is subject to
the .9 percent additional...

Andrea would like to organize SHO as either an LLC (taxed as a
sole proprietorship) or a C corporation. In either form, the entity
is expected to generate an 11 percent annual before-tax return on a
$200,000 investment. Andrea’s marginal income tax rate is 35
percent and her tax rate on dividends and capital gains is 15
percent. Andrea will also pay a 3.8 percent net investment income
tax on dividends and capital gains she recognizes. If Andrea
organizes SHO...

Andrea would like to organize SHO as either an LLC (taxed as a
sole proprietorship) or a C corporation. In either form, the entity
is expected to generate an 11 percent annual before-tax return on a
$200,000 investment. Andrea’s marginal income tax rate is 35
percent and her tax rate on dividends and capital gains is 15
percent. Andrea will also pay a 3.8 percent net investment income
tax on dividends and capital gains she recognizes. If Andrea
organizes SHO...

Andrea would like to organize SHO as either an LLC (taxed as a
sole proprietorship) or a C corporation. In either form, the entity
is expected to generate an 10 percent annual before-tax return on a
$320,000 investment. Andrea’s marginal income tax rate is 35
percent and her tax rate on dividends and capital gains is 15
percent. Andrea will also pay a 3.8 percent net investment income
tax on dividends and capital gains she recognizes. If Andrea
organizes SHO...

Andrea would like to organize SHO as either an LLC (taxed as a
sole proprietorship) or a C corporation. In either form, the entity
is expected to generate an 11 percent annual before-tax return on a
$200,000 investment. Andrea’s marginal income tax rate is 35
percent and her tax rate on dividends and capital gains is 15
percent. Andrea will also pay a 3.8 percent net investment income
tax on dividends and capital gains she recognizes. If Andrea
organizes SHO...

Thad, a single taxpayer, reports taxable income before the QBI
deduction of $188,000. Thad, a CPA, operates an accounting practice
as a single member LLC (which he reports as a sole proprietorship).
During the 2019 tax year, his proprietorship generates qualified
business income of $150,400 after deducting self-employment taxes,
W–2 wages of $112,800, and $8,400 of qualified property. Assume the
QBI amount is net of the self-employment tax deduction. If
required, round any division to two decimal places. Round your...

Exercise 15-17 (Algorithmic) (LO. 3, 4)
Thad, a single taxpayer, reports taxable income before the QBI
deduction of $171,500. Thad, a CPA, operates an accounting practice
as a single member LLC (which he reports as a sole proprietorship).
During the tax year, his proprietorship generates qualified
business income of $137,200 after deducting self-employment taxes,
W–2 wages of $102,900, and $8,800 of qualified property.
Assume the QBI amount is net of the self-employment tax
deduction. If required, round any division to...

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