Question
In the current year, the DOE LLC received revenues of $300,000 and paid the following amounts: $50,000 of business expenses (rent, utilities, wages, depreciation, etc.),
In the current year, the DOE LLC received revenues of $300,000 and paid the following amounts: $50,000 of business expenses (rent, utilities, wages, depreciation, etc.), a $50,000 guaranteed payment (for services) to 50% member Dave, $20,000 to member Ethan for consulting services, and $10,000 as a distribution to member Olivia. In addition, the LLC earned $4,000 of tax-exempt interest income during the year. Dave is the managing member of the LLC. Daves basis in his LLC interest was $50,000 at the beginning of the year and includes a $15,000 share of LLC liabilities. At the end of the year, his share of the LLCs liabilities was $25,000.
- How much income must Dave report for the tax year and what is the character of the income?
- What is Daves basis in his LLC interest at the end of the tax year?
- On what income will Daves self-employment tax be calculated?
- What is the maximum amount Dave might be able to deduct for this business under [section symbol] 199A?
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