PROBLEMS 1. Andy is an electrician who generates $140,000 in gross income from his sole proprietorship. He incurs $20,000 of expenses in connection with his business. Additionally, Andy earns $2,000 in interest and $3,000 of dividend income during the year from outside investments. Assume Andy is single, claims a standard deduction of $12,000, and has no other tax items for the year. (a) Does Andy qualify to take the § 199A deduction and, if so, determine the amount of his deduction. (b) What result if Andy does not operate a sole proprietorship, but instead earns $120,000 of compensation income by performing electrical services as an employee of a general contracting company. (c) Assume the same facts as in (a), above, except that, instead of operating a sole proprietorship, Andy is a 50% owner of an LLC that provides electrical services. The LLC generates $280,000 of revenue and incurs $40,000 of deductible expenses, and allocates all of its profits and losses equally between the two owners.
PROBLEMS 1. Andy is an electrician who generates $140,000 in gross income from his sole proprietorship. He incurs $20,000 of expenses in connection with his business. Additionally, Andy earns $2,000 in interest and $3,000 of dividend income during the year from outside investments. Assume Andy is single, claims a standard deduction of $12,000, and has no other tax items for the year. (a) Does Andy qualify to take the § 199A deduction and, if so, determine the amount of his deduction. (b) What result if Andy does not operate a sole proprietorship, but instead earns $120,000 of compensation income by performing electrical services as an employee of a general contracting company. (c) Assume the same facts as in (a), above, except that, instead of operating a sole proprietorship, Andy is a 50% owner of an LLC that provides electrical services. The LLC generates $280,000 of revenue and incurs $40,000 of deductible expenses, and allocates all of its profits and losses equally between the two owners.
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 55P
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Transcribed Image Text:PROBLEMS
1. Andy is an electrician who generates $140,000 in gross income from his
sole proprietorship. He incurs $20,000 of expenses in connection with his
business. Additionally, Andy earns $2,000 in interest and $3,000 of dividend
income during the year from outside investments. Assume Andy is single,
claims a standard deduction of $12,000, and has no other tax items for the
year.
(a) Does Andy qualify to take the § 199A deduction and, if so,
determine the amount of his deduction.
(b) What result if Andy does not operate a sole proprietorship, but
instead earns $120,000 of compensation income by performing
electrical services as an employee of a general contracting
company.
(c) Assume the same facts as in (a), above, except that, instead of
operating a sole proprietorship, Andy is a 50% owner of an
LLC that provides electrical services. The LLC generates
$280,000 of revenue and incurs $40,000 of deductible
expenses, and allocates all of its profits and losses equally
between the two owners.
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