Question

In: Accounting

1. Silver Corporation, which operates a department store, sells a television to a store employee for...

1. Silver Corporation, which operates a department store, sells a television to a store employee for $300. The regular customer price is $500, and the gross profit rate is 25%. The corporation also sells the employee a service contract for $120. The regular customer price for the contract is $150. How much must the employee include in income from both these transactions in total?

a.

$125
b.

$30
c.

$75
d.

$0

2. Ellie (a single taxpayer) is the owner of ABC, LLC. The LLC (a sole proprietorship) reports QBI of $900,000 and is not a “specified services” business. ABC paid total W-2 wages of $300,000, and the total unadjusted basis of property held by ABC is $30,000. Ellie’s taxable income before the QBI deduction is $740,000 (this is also her modified taxable income). What is Ellie’s QBI deduction for 2019?

a.

$150,000
b.

$75,750
c.

$148,000
d.

$180,000

Solutions

Expert Solution

1.

Television price for customers is $ 500
Gross profit 25% will be $ 125 per TV

This means cost is $ 375

Sale price to employees is $ 300

Income is $ 75 from this transaction

Price for service contract is $ 150
Discount at 20% = $ 30
Employee Price is $ 120

Employee income from this transaction is 150 - 30 - 120 = 0

So answer is Option C

(As per Non Taxable Employee Benefits, discount on service contracts is limited to 20% only.

2.

Answer is $ 148,000

She is the owner of ABC LLC. LLC reports QBI of $ 900,000 and is not a specified services business
ABC paid total wages of $ 300,000 and unadjusted basis of property si $ 30,000.

Her taxable income before QBI deduction exceeds threshold of $ 207,500, it would be least of the following

a. 20% of QBI which is 180,000
b. 20% of modified taxable income $ 148,000
c.

50% of W2 wages = 150,000 OR
25% of W2 wages + 2.5% of unadjusted basis of property = 75,750

Least is $ 148,000

ekkarill92 answered 3 years ago
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