Scott and Michael started a company that sells games. Their company, Good Gaming (GG), specializes in board and card games. Scott and Michael formed the business at the beginning of 2022, and each contributed $50,000 in exchange for a 50 percent ownership interest. GG also borrowed $200,000 from a local bank. Both Scott and Michael had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GGs 2022 activities.

GG uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year basis.

GG received $450,000 of sales revenue and reported $210,000 of cost of goods sold (it did not have any ending inventory).

GG paid $30,000 compensation to Scott, $30,000 compensation to Michael, and $40,000 of compensation to other employees (assume these amounts include applicable payroll taxes, if any).

GG paid $15,000 of rent for a building and equipment, $20,000 for advertising, $14,000 in interest expense, $4,000 for utilities, and $2,000 for supplies.

GG contributed $5,000 to charity.

GG received a $1,000 qualified dividend from a great stock investment (it owned 2 percent of the corporation distributing the dividend), and it recognized $1,500 in short-term capital gain when it sold some of the stock.

On December 1, 2022, GG distributed $20,000 to Scott and $20,000 to Michael.

GG has qualified property of $300,000 (unadjusted basis).

Required:

Assume Scott and Michael formed GG as an S corporation.

Compute the tax basis of Michaels stock in GG at the end of 2022.

What amount of Michaels income from GG is subject to payroll or self-employment taxes?

What will be reported to Michael as ordinary income and separately stated items on Schedule K-1?

How will the $20,000 distribution Michael receives on December 1 be treated?

Assuming Michael files as MFJ and the only other income or loss item on his return is $100,000 in wages earned by his wife, what would his 199A deduction be that is reported on his return?

Assume Scott and Michael formed GG as an LLC.

Compute the tax basis of Michaels ownership interest in GG at the end of 2022.

What amount of Michaels income from GG is subject to payroll or self-employment taxes? (because of the amount of work done by Michael for GG, you should treat him like you would a general partner)

What will be reported to Michael as ordinary income and separately stated items on Schedule K-1?

How will the $20,000 distribution Michael receives on December 1 be treated?

Assume Scott and Michael formed GG as a C corporation.

Calculate GGs Taxable Income.

Compute the tax basis of Michaels stock in GG at the end of 2022.

What amount of Michaels income from GTE is subject to payroll or self-employment taxes?

How will the $20,000 distribution Michael receives on December 1 be treated?

Scott and Michael started a company that sells games. Their company, Good Gaming (GG), specializes in board and card games. Scott and Michael formed the business at the beginning of 2022, and each contributed $50,000 in exchange for a 50 percent ownership interest. GG also borrowed $200,000 from a local bank. Both Scott and Michael had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GGs 2022 activities.

GG uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year basis.

GG received $450,000 of sales revenue and reported $210,000 of cost of goods sold (it did not have any ending inventory).

GG paid $30,000 compensation to Scott, $30,000 compensation to Michael, and $40,000 of compensation to other employees (assume these amounts include applicable payroll taxes, if any).

GG paid $15,000 of rent for a building and equipment, $20,000 for advertising, $14,000 in interest expense, $4,000 for utilities, and $2,000 for supplies.

GG contributed $5,000 to charity.

GG received a $1,000 qualified dividend from a great stock investment (it owned 2 percent of the corporation distributing the dividend), and it recognized $1,500 in short-term capital gain when it sold some of the stock.

On December 1, 2022, GG distributed $20,000 to Scott and $20,000 to Michael.

GG has qualified property of $300,000 (unadjusted basis).

Required:

Assume Scott and Michael formed GG as an S corporation.

Compute the tax basis of Michaels stock in GG at the end of 2022.

What amount of Michaels income from GG is subject to payroll or self-employment taxes?

What will be reported to Michael as ordinary income and separately stated items on Schedule K-1?

How will the $20,000 distribution Michael receives on December 1 be treated?

Assuming Michael files as MFJ and the only other income or loss item on his return is $100,000 in wages earned by his wife, what would his 199A deduction be that is reported on his return?

Assume Scott and Michael formed GG as an LLC.

Compute the tax basis of Michaels ownership interest in GG at the end of 2022.

What amount of Michaels income from GG is subject to payroll or self-employment taxes? (because of the amount of work done by Michael for GG, you should treat him like you would a general partner)

What will be reported to Michael as ordinary income and separately stated items on Schedule K-1?

How will the $20,000 distribution Michael receives on December 1 be treated?

Assume Scott and Michael formed GG as a C corporation.

Calculate GGs Taxable Income.

Compute the tax basis of Michaels stock in GG at the end of 2022.

What amount of Michaels income from GTE is subject to payroll or self-employment taxes?

How will the $20,000 distribution Michael receives on December 1 be treated?