Question

Required information Problem 15-45 (LO 15-3) (The following information applies to the questions displayed below) Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $145,000 of business income from WCC for the year. Jacob's marginal income tax rate is 37 percent. The business allocation is subject to 29 percent of self- employment tax and 0.9 percent additional Medicare tax. (Round your intermediate calculations to the nearest whole dollar amount.) Problem 15-45 Part a a. What is the amount of tax Jacob will owe on the income allocation if the income is not qualified business income? Tax owed of income is not OBI

Answer 1

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Answers are highlighted in yellow: Solution: 145000 -1942 Business income allocated Less: QBI deduction (not a qualifying business) Less: Deduction for 50% of Self empl. Tax (145000*92.35%)*2.9%*50% Net taxable business income Tax liability (143058*37%) Self-employment tax (145000*92.35%)*2.9% Additional medicare tax (145000*92.35%)*0.9% Total Tax if income is not QBI 143058 52931 3883 1205 58,019 or 58020 due to rounding off a) $ Business income allocated Less: QBI deduction (145000*20%) Less: Deduction for 50% of Self empl. Tax (145000*92.35%)*2.9% 50% Net taxable business income Tax liability (114058*37%) Self-employment tax (145000*92.35%) *2.9% Additional medicare tax (145000*92.35%) *0.9% Total Tax if income is a QBI 145000 -29000 -1942 114058 42201 3883 1205 47,289 or 47290 due to rounding off $