Question
Mackenzie is considering conducting her business, Mac561, as either a single-member LLC or an S corporation. Assume her marginal ordinary income tax rate is 37
Mackenzie is considering conducting her business, Mac561, as either a single-member LLC or an S corporation. Assume her marginal ordinary income tax rate is 37 percent, her marginal FICA rate on employee compensation is 1.45 percent, her marginal self-employment tax rate is 2.9 percent (her other self-employment income and/or salary exceeds the $147,000 wage base limit for the 12.4 percent Social Security tax portion of the self-employment tax), and any employee compensation or self-employment income she receives is subject to the 0.9 percent additional Medicare tax. Also, assume Mac561 generated $200,000 of business income before considering the deduction for compensation Mac561 pays to Mackenzie and Mackenzie can claim the full qualified business income deduction on Mac561's business income allocated to her. Determine Mackenzie's after-tax cash flow from the entity's business income and any compensation she receives from the business under the following assumptions: Note: Round intermediate calculations and your final answers to the nearest whole dollar. Mackenzie conducted Mac561 as an S corporation and she received a salary of $100,000. All business income allocated to her is also distributed to her.
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