Taxpayer owns and operates a single member LLC. Taxpayer annually makes $1,000,000 and that income is subject SE tax, the high wage surtax, and ordinary income tax. Taxpayer will sell the company on the first day of the next year (year 2) for $1,000,000 and exit the business. Taxpayer will have no other income in the year of the sale. In both year 1 and year 2 the taxpayer has home mortgage interest deductions equal to the Standard Deduction for unmarried taxpayers. The sale of the LLC will be a capital gain and will be long term. Taxpayer has only $10,000 in basis in the LLC. Upon the receipt of the sales proceeds taxpayer will make a charitable contribution of $160,000 to a qualified tax-exempt organization.

Question 2a. What is the tax benefit associated with making the $160,000 in the year of the sale (year 2)? (This is asking you to determine the cash taxes saved and the effective or marginal rate: cash taxes saved divided by $160,000).

Question 2b. If the taxpayer makes the contribution in the current year (year 1) rather than the year of sale (year 2) what is the tax benefit associated with the $160,000? (This is asking you to determine the cash taxes saved and the rate: cash taxes saved divided by $160,000).

Question 2c. Assume that the taxpayer made the charitable contribution in the current year by gifting 16% of the shares rather than gifting cash. What is the tax benefit associated with the contribution? (This is asking you to determine the cash taxes saved and the rate: cash taxes saved divided by $160,000).

Question 2d. Following on Question 2c facts what is the capital gain in year of sale? How much tax was saved by gifting 16% of the shares rather than cash (also include the NIIT)?

Question 2e. What would be your planning recommendation based on the above?