80.2K

Verified Solution

Link Copied!

Assue is margin ordinary nesbusine sap, his marginal FICA rate on employeecompensations his i po ta tate is $2\mathrm{.}9$ percent, and any employarcompensation or self$-$employment income he receives is subject to the $0\mathrm{.}9$ percent additional Medicare tax.Also, assume JBD generated $$400,000$ of business income before considering the deduction for compensation JBD pays to Tom and Tom can claim the full qualified busineUsing the following information to complete questions $21$ and $22.$

Tom is considering conducting his business, JBD$,$ as either a single member LLC or as an S corporation.

Assume his marginal ordinary income tax rate is $37$ percent, his marginal FICA rate on employee

compensation is $1\mathrm{.}45$ percent, his marginal self$-$employment tax rate is $2\mathrm{.}9$ percent, and any employee

compensation or self$-$employment income he receives is subject to the $0\mathrm{.}9$ percent additional Medicare tax.

Also, assume JBD generated $$400,000$ of business income before considering the deduction for

compensation JBD pays to Tom and Tom can claim the full qualified business income deduction on JBD$\text{'}$s

business income.

How much after$-$tax cash flow would Tom receive from the entity's business income as an LLC$?$

A$)265,425$

B$)134,575$

C$)269,148$

D$)158,407$

When Tom conducted JBD as an $S$ corporation and he received a salary of $$100,000.$ All business

income allocated to him is also distributed to him. How much after$-$tax tax flow would Tom receive from

the entity's business income as an S corporation?

A$)198,550$

B$)278,840$

C$)270,829$

D$)130,029$ss

income deduction on JBD'Sbusiness income.

Answer & Explanation Solved by verified expert

See Answer