1. Nancy Smith is the sole shareholder and employee of White Corporation, a calendar year C corporation...
Question:
1. Nancy Smith is the sole shareholder and employee of White Corporation, a calendar year C corporation that is engaged exclusively in accounting services. During the current year, White has operating income of $320,000 and operating expenses (excluding salary) of $150,000. Further, White Corporation pays Nancy a salary of $100,000. The salary is reasonable in amount and Nancy is in the 32% marginal tax bracket (15% capital gains tax rate) irrespective of any income from White. Assuming that White Corporation distributes all after-tax income as dividends, how much total combined income tax do White and Nancy pay in the current year? Compute Nancy's tax on this income only, without considering any personal deductions such as her standard deduction and ignore any employment tax considerations.
a $54,995
b $14,700
c $32,000
d None of the above.
e $46,700
2. Taylor, a single taxpayer, has taxable income before the QBI deduction of $190,700. A CPA, he operates an accounting practice as a single-member LLC (which he reports as a sole proprietorship). During 2019, his proprietorship reports net income of $150,000, W-2 wages of $125,000, and $10,000 of qualified property. What is Taylor's qualified business income deduction?
a.$30,000.
b.$0.
c.$31,500.
d.$12,000.
e. None of these choices are correct
3. Luis, a single taxpayer, has taxable income before the QBI deduction of $191,000. Luis is a doctor who operates a medical practice as a single member LLC (reporting as a sole proprietorship). During 2019, his proprietorship generates qualified business income of $152,800, W-2 wages of $114,600, and $12,400 of qualified property. What is Luis' qualified business income deduction?
Answer: $...…
4. In the current year, Tern, Inc., a calendar year C corporation, has $9 million of adjusted taxable income, $300,000 of business interest income, zero floor plan financing interest, and $3.2 million of business interest expense. Tern has average gross receipts for the prior three-year period of $45 million. Which of the following statements is correct about the treatment of Tern's business interest expense?
a. Current year deduction of $2,790,000, carryforward of $410,000.
b. Current year deduction of $3 million, carryforward of $200,000.
c. Current year deduction of $3 million, carryback of $200,000.
d. Current year deduction of $3.2 million.
e. Current year deduction of $2,790,000, carryback of $410,000.
5. Charlotte is a partner in, and sales manager for, CD Partners, a domestic business that is not a "specified services" business. During the tax year, she receives guaranteed payments of $158,200 from CD Partners for her services to the partnership as its sales manager. In addition, her distributive share of CD Partners' ordinary income (its only item of income or loss) was $94,920.
What is Charlotte's qualified business income?
$.........................
