Ms. Kona owns a 10 percent interest in Carlton LLC. This year, the LLC generated $72,400 ordinary

Question:

Ms. Kona owns a 10 percent interest in Carlton LLC. This year, the LLC generated $72,400 ordinary income. Ms. Kona’s marginal tax rate is 32 percent, and she does not pay SE tax on her LLC income.

a. Compute the tax cost on Ms. Kona’s share of Carlton’s income assuming that she received a $35,000 cash distribution this year.

b. Compute the tax cost on Ms. Kona’s share of Carlton’s income assuming that she received no cash distribution this year.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...

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