Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In the current year, the DOE LLC received revenues of $200,000 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 $200,000 and paid the following

amounts: $50,000 of business expenses (rent, utilities, wages, depreciation, etc.), a $40,000

guaranteed payment (for services) to 50% member Dave, $10,000 to member Ethan for

consulting services, and $10,000 as a distribution to member Olivia. In addition, the LLC

earned $2,000 of tax-exempt interest income during the year. Dave is the managing member

of the LLC. Dave's basis in his LLC interest was $50,000 at the beginning of the year, and

includes a $12,000 share of LLC liabilities. At the end of the year, his share of the LLC's

liabilities was $20,000.

a. How much income must Dave report for the tax year and what is the character of

the income?

b. What is Dave's basis in his LLC interest at the end of the tax year?

c. On what income will Dave's self-employment tax be calculated?

d. What is the maximum amount Dave might be able to deduct for this business (QBI)?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Cost Accounting

Authors: William N. Lanen, Shannon Anderson, Michael W Maher

6th edition

1259969479, 1259565408, 978-1259969478

More Books

Students also viewed these Accounting questions

Question

Explain the process of MBO

Answered: 1 week ago