SWFT Corp Partner Estates Trusts
42nd Edition
ISBN: 9780357161548
Author: Raabe
Publisher: Cengage
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K is the president and chief executive officer of KL, Inc., an S corporation that is owned equally byindividuals K and L. K receives a salary of $83,000, and her share of the net income, after deductingexecutive salaries, is $50,000. What is the proper income tax and payroll tax (F.I.C.A. or self‐employmenttax) treatment of each of the following to K for the current calendar year?a. The salaryb. The net income of $50,000.c. Calculate the payroll tax for K
Jack and Jill are owners of UpAHill, an S Corporation. They own 25 and 75
percent, respectively.
UpAHill Corporation (an S Corporation)
Income Statement
December 31, Year 1 and Year 2
Sales revenue
Cost of goods sold
Salary to owners Jack and Jill
Employee wages
Depreciation expense
Miscellaneous expenses
Interest income (related to business)
Qualified dividend income
Overall net income
Ordinary income
Dividend income
Interest income
Allocated wages
Unadjusted basis of qualified property
a. What amount of ordinary income and separately stated items are allocated to them for years 1
and 2 based on the information above? Assume that UpAHill Corporation has $100,000 of qualified
property (unadjusted basis) in both years.
$
$
Year 1
Year 2
$ 310,000
$ 175,000
(60,000) (85,000)
(40,000) (50,000)
(15,000)
(20,000)
(10,000)
(15,000)
(9,000)
2,500
1,000
$ 45,000 $ 134,500
Answer is complete but not entirely correct.
Jack
Jill
$
(7,500)
2,000
500
44,500 $
$
25 × $
$ 11,125 $
Year 1
Year 2…
Ming and Denise, mother and daughter, operate a local restaurant as an LLC. The MD LLC earned a profit of $200,000 in the current year. Denise’s equal partnership interest was acquired by gift from Ming. Assume that capital is a material income-producing factor and that Ming manages the day-to-day operations of the restaurant without any help from Denise. Reasonable compensation for Ming’s services is $50,000.
How much of the LLC’s income is allocated to Ming?
What is the maximum amount of the LLC’s income that can be allocated to Denise?
Assuming that Denise is 15 years old, has no other income, and is a dependent of Ming, how is Denise’s income from the LLC taxed?
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Similar questions
- Jack and Jill are owners of UpAHill, an S Corporation. They own 25 and 75 percent, respectively. UpAHill Corporation (an S Corporation) Income Statement December 31, Year 1 and Year 2 Sales revenue Cost of goods sold Salary to owners Jack and Jill Employee wages Depreciation expense Miscellaneous expenses. Interest income (related to business) Qualified dividend income Overall net income Ordinary income Allocated wages Unadjusted basis of qualified property Year 1 $ 175,000 (60,000) (40,000) a. What amount of ordinary income and separately stated items are allocated to them for years 1 and 2 based on the information above? Assume that UpAHill Corporation has $100,000 of qualified property (unadjusted basis) in both years. Year 1 (15,000) (10,000) (7,500) 2,000 500 $ 45,000 Year 2 $ 310,000 (85,000) (50,000) (20,000) (15,000) (9,000) 2,500 1,000 $ 134,500 Jack Year 2 Year 1 Jill Year 2 b. Complete UpAHill's Form 1120-S, Schedule K, for year 1. Complete Jill's Form 1120-S Schedule K for…arrow_forwardWhich of the following taxpayers may claim a deduction for qualified business income? a. A driver for Uber or Lyft. b. A vetenarian operating as an S corporation. In addition to veterinary services, revenues are also derived from the sale of pet food and supplies and from the boarding of animals. c. A CPA operating as an LLC taxed as a sole proprietorship. The CPA is single and has taxable income of $150,000. d. Same as part(c), except the CPA has taxable income of $200,000 e. A real estate salesperson. f. A pet sitter/ dog walker. g. A sole proprietor software developer. h. An individual wage earner who derives $60,000 of rental income from a duplex she owns.arrow_forward
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