Question

Required information The following information applies to the questions displayed below.) Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $140,000 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 (ABI) and Jacob qualifies for the full QBI deduction? Answer is complete but not entirely correct. Tax owed if income is QB1 $ 45,658 ®

Answer 1

(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 -

	Particulars	Explanation	Amount ($)
A.	Business income allocation	Given in question	140000
B.	QBI deduction	(A) * 20%	28000
C.	Deduction for 50 % of self-employment tax	(A) * 0.9235 * 0.029 * 0.5	1875
D.	Net income taxable business income	A - B - C	110125
E.	Income tax paid by owner	(D) * 0.37	40746
F.	Self employment tax	(A) * 0.9235 * 0.029	3749
G.	Additional medicare tax	(A) * 0.9235 * 0.009	1164
Tax owed if income is QBI		E + F + G	45659