In: Accounting
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 |
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