Question

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 Medicare tax. Finally, Mac561 generated $210,000 of business income before considering the deduction for compensation Mac561 pays to Mackenzie and Mackenzie can claim the full qualified business income deduction on Mac561’s business income. Mackenzie conducted Mac561 as a single-member LLC.

Same facts as in Question 10 above. Mackenzie conducted Mac561 as an S corporation and she received a salary of $100,000. All business income allocated to her is also distributed to her. Show work!

Answer 1

Answer Mackenzie Conducted Macs61 as a single -member LLC. Particulars Amount | Explanation 1 Business income 210000 Given 2. QBI Deducten 4 2000 1x 200/ 3. Deduction for some of FICA tarde 28120 Ix0.9235x0 24x05 4. Net income taxable business 139880 (1)+ (2)+(3) in Come 51755 4x0.37 5. Encome Employement faire 6. Self Employement tax 7. Additional medicame tase 56241 (1)X 0.9235x0.99 1745 8. Total face (11 0.9235x0.609 additional medicame tax. (5)+CH(7) 109741 100359 1-8

@ Mackenzie Conducted Macs61 as an scopulation & She greceived a salary of $100000 - All business income allocated to hes is also distributed to her. Particulars Amount | Explanation Ti Busines income before coupersatie Given 210000 2. Salary - 100000 Given -1450 2x 0.145 013-2)-3) 0$550 21910 4x 204 130260 : 48196 3. FICA deduction 4. Businey income allocation & distribu -tion to aconer S. . Q BI deduction Net tareable busines income 7. Encome tax on net businey income 8. scelare oreceived - 9. Income tax on salary 10. Abditional medicare tax on - Salary 4. FICA tax paid - Aften -tax cash floce 445, 6x374.(037) 100000 - 37.000 8X0:37 900 (81x 0.009 - 1450 129804. & X0.145 Enuployees pertien 4+7 +8+9+10 til