Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Kyle Thomas and Terrell Bauman began a new consulting business on January 1, 2021. Click the icon to view the additional information.) (Click the icon

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Kyle Thomas and Terrell Bauman began a new consulting business on January 1, 2021. Click the icon to view the additional information.) (Click the icon to view the 2021 tax rate schedule for the Married filing jointly filing status.) (Click the icon to view the corporation tax rate information.) (Click the icon to view the standard deduction amounts.) Read the requirements Requirement a. Compute the total tax liability of KT, Inc. and Kyle and his wife for 2021. Ignore the net investment income tax. (Enter amounts in dollars and not in millions. If an input field is not used in the table, leave the input field empty, do not select a label or enter a zero. Do not round intermediary calculations. Only round the amounts you enter in the input fields to the nearest cent. Use the tax rate schedule for necessary tax calculations.) Begin by calculating the tax liability for KT, Inc. Minus: Taxable income Corporate tax Compute the tax liability of Kyle and his wife. Adjusted gross income (AGI) Minus: Deductions from AGI: Taxable income Tax on taxable income without dividends (tax rate schedule) Tax on dividends Total tax (Individual) Requirement b. Instead of organizing the consulting business as a C corporation, assume Kyle and Terrell organized the business as a limited liability company, KT, LLC. KT made a distribution of $280,000 each to Kyle and Terrell during 2021. Compute the total tax liability of KT, LLC and Kyle for 2021. Ignore any additional tax on net investment income, and ignore the qualified business income deduction. (Enter amounts in dollars and not in millions. If an input field is not used in the table, leave the input field empty; do not select a label or enter a zero. Do not round intermediary calculations. Only round the amounts you enter in the input fields to the nearest cent. Use the tax rate schedule for necessary tax calculations. Enter a "0" for items with a zero balance.) Begin by calculating the tax liability for KT, LLC. Minus: Taxable income Corporate tax Compute the tax liability of Kyle for 2021. Adjusted gross income (AGI) Minus: Deductions from AGI: Taxable income Tax on taxable income without dividends (tax rate schedule) Tax on dividends Total tax (Individual) They organized the business as a C corporation, KT, Inc. During 2021, the corporation was successful and generated revenues of $1.5 million. KT had operating expenses of $825,000 before any payments to Kyle or Terrell. During 2021, KT paid dividends to Kyle and Terrell in the amount of $280,000 each. Assume that Kyle's wife earned $150,000 from her job, they file a joint return, have itemized deductions of $35,000, and have no children. Married, Filing Joint and Surviving Spouse If taxable income is: The tax is: Not over $19,900 10% of taxable income. Over $19,900 but not over $81,050 ... $1,990.00 + 12% of the excess over $19,900. Over $81,050 but not over $172,750 ..$9,328.00 + 22% of the excess over $81,050. Over $172,750 but not over $329,850 .... $29,502.00 + 24% of the excess over $172,750. Over $329,850 but not over $418,850 $67,206.00 + 32% of the excess over $329,850. Over $418,850 but not over $628,300 .. $95,686.00 + 35% of the excess over $418,850. Over $628,300 .. $168.993.50 +37% of the excess over $628,300. Personal and Dependency Exemptions Suspended: In conjunction with the increased standard deduction amount, the Tax Cuts and Jobs Act reduces the personal exemption amount to 50 for tax years from 2018 through 2025, effectively suspending the exemptions for these years. A corporation's taxable income is subject to a flat tax rate of 21%. $ 0 25,100 18,800 $ $ 12,550 STANDARD DEDUCTION Filing Status Married individuals filing joint returns and surviving spouses Heads of households Unmarried individuals (other than surviving spouses and heads of households) Married individuals filing separate returns Additional standard deduction for the aged and the blind; Individual who is married and surviving spouses Additional standard deduction for the aged and the blind; Individual who is unmarried and not a surviving spouse Taxpayer claimed as dependent on another taxpayer's return: Greater of (1) earned income plus $350 or (2) $1,100. S 12,550 $1,350* $1,700* Kyle Thomas and Terrell Bauman began a new consulting business on January 1, 2021. Click the icon to view the additional information.) (Click the icon to view the 2021 tax rate schedule for the Married filing jointly filing status.) (Click the icon to view the corporation tax rate information.) (Click the icon to view the standard deduction amounts.) Read the requirements Requirement a. Compute the total tax liability of KT, Inc. and Kyle and his wife for 2021. Ignore the net investment income tax. (Enter amounts in dollars and not in millions. If an input field is not used in the table, leave the input field empty, do not select a label or enter a zero. Do not round intermediary calculations. Only round the amounts you enter in the input fields to the nearest cent. Use the tax rate schedule for necessary tax calculations.) Begin by calculating the tax liability for KT, Inc. Minus: Taxable income Corporate tax Compute the tax liability of Kyle and his wife. Adjusted gross income (AGI) Minus: Deductions from AGI: Taxable income Tax on taxable income without dividends (tax rate schedule) Tax on dividends Total tax (Individual) Requirement b. Instead of organizing the consulting business as a C corporation, assume Kyle and Terrell organized the business as a limited liability company, KT, LLC. KT made a distribution of $280,000 each to Kyle and Terrell during 2021. Compute the total tax liability of KT, LLC and Kyle for 2021. Ignore any additional tax on net investment income, and ignore the qualified business income deduction. (Enter amounts in dollars and not in millions. If an input field is not used in the table, leave the input field empty; do not select a label or enter a zero. Do not round intermediary calculations. Only round the amounts you enter in the input fields to the nearest cent. Use the tax rate schedule for necessary tax calculations. Enter a "0" for items with a zero balance.) Begin by calculating the tax liability for KT, LLC. Minus: Taxable income Corporate tax Compute the tax liability of Kyle for 2021. Adjusted gross income (AGI) Minus: Deductions from AGI: Taxable income Tax on taxable income without dividends (tax rate schedule) Tax on dividends Total tax (Individual) They organized the business as a C corporation, KT, Inc. During 2021, the corporation was successful and generated revenues of $1.5 million. KT had operating expenses of $825,000 before any payments to Kyle or Terrell. During 2021, KT paid dividends to Kyle and Terrell in the amount of $280,000 each. Assume that Kyle's wife earned $150,000 from her job, they file a joint return, have itemized deductions of $35,000, and have no children. Married, Filing Joint and Surviving Spouse If taxable income is: The tax is: Not over $19,900 10% of taxable income. Over $19,900 but not over $81,050 ... $1,990.00 + 12% of the excess over $19,900. Over $81,050 but not over $172,750 ..$9,328.00 + 22% of the excess over $81,050. Over $172,750 but not over $329,850 .... $29,502.00 + 24% of the excess over $172,750. Over $329,850 but not over $418,850 $67,206.00 + 32% of the excess over $329,850. Over $418,850 but not over $628,300 .. $95,686.00 + 35% of the excess over $418,850. Over $628,300 .. $168.993.50 +37% of the excess over $628,300. Personal and Dependency Exemptions Suspended: In conjunction with the increased standard deduction amount, the Tax Cuts and Jobs Act reduces the personal exemption amount to 50 for tax years from 2018 through 2025, effectively suspending the exemptions for these years. A corporation's taxable income is subject to a flat tax rate of 21%. $ 0 25,100 18,800 $ $ 12,550 STANDARD DEDUCTION Filing Status Married individuals filing joint returns and surviving spouses Heads of households Unmarried individuals (other than surviving spouses and heads of households) Married individuals filing separate returns Additional standard deduction for the aged and the blind; Individual who is married and surviving spouses Additional standard deduction for the aged and the blind; Individual who is unmarried and not a surviving spouse Taxpayer claimed as dependent on another taxpayer's return: Greater of (1) earned income plus $350 or (2) $1,100. S 12,550 $1,350* $1,700*

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

Managerial Accounting Tools For Business Decision Making

Authors: Jerry J. Weygandt, Paul D. Kimmel, Ibrahim M. Aly, Donald E. Kieso

6th Canadian Edition

1119731828, 9781119731825

More Books

Students also viewed these Accounting questions