Question

BLANK is a member of BCC (an LLC taxed as a partnership). BLANK was allocated $50,000 of business income from BCC for the year. BLANK'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 BLANK will owe on the income allocation if the income is not qualified business income?

Tax owed if income is not QBI=

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

tax owed if income is QBI=

Answer 1

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Answers are highlighted in yellow: solution: 50000 Business income allocated Less: QBI deduction (not a qualifying business) Less: Deduction for 50% of Self empl. Tax (50000*92.35%)*2.9%*50% Net taxable business income Tax liability (49330*37%) Self-employment tax (50000*92.35%)*2.9% Additional medicare tax (50000*92.35%)*0.9% Total Tax if income is Not QBI -670 49330 18252 1339 416 a) $ 20,007 Business income allocated Less: QBI deduction (50000*20%) Less: Deduction for 50% of Self empl. Tax (50000*92.35%)*2.9%*50% Net taxable business income Tax liability (39330*37%) Self-employment tax (50000*92.35%) *2.9% Additional medicare tax (50000*92.35%) *0.9% Total Tax if income is a QBI 50000 -10000 -670 39330 14552 1339 416 16,307 b) $