Question
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)?
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