John, Jack, Jill, and Julie form limited liability company and elect to be S-Corporation. They contribute the
Question:
John, Jack, Jill, and Julie form limited liability company and elect to be S-Corporation. They contribute the following amounts:
John - 25,000
Jack - 10,000
Jill - 10,000
Julie - 5,000
The operating agreement says that all profits are to be distributed by law.
John will perform services for the company and get paid $100,000 a year for those services. The company will be able to deduct this amount from net income. In the first year of operations, the company had the following items of income:
Services - 160,000
Expenses - 24,000
Tax Depreciation - 28,000
Nobody withdraws any money from the S-Corp, except for Jack who withdraws $1,000.
Questions (using 2020 rates)
1. How much of John's taxable income is subject to Self Employment Tax ?
2. What is Jill's ending basis?
3. What is Julie's profit percentage? (e.g. if 22%, say .22)
Expert Answer:
Business Law Text and Cases
ISBN: 978-0324655223
11th Edition
Authors: Kenneth W. Clarkson, Roger LeRoy Miller, Gaylord A. Jentz, F
