Question

In: Accounting

#45 — LO.6 Scott and Laura are married and will file a joint tax return. Scott...

#45 — LO.6 Scott and Laura are married and will file a joint tax return. Scott has a sole proprietorship (not a “specified services” business) that generates qualified business income of $300,000. The proprietorship pays W–2 wages of $40,000 and holds property with an unadjusted basis of $10,000. Laura is employed by a local school district. Their taxable income before the QBI deduction is $386,600 (this is also their modified taxable income).

a. Determine Scott and Laura’s QBI deduction, taxable income, and tax liability for 2020.

b. After providing you with the original information in the problem, Scott finds out that he will be receiving a $6,000 bonus in December 2020 (increasing their taxable income before the QBI deduction by this amount). Redetermine Scott and Laura’s QBI deduction, taxable income, and tax liability for 2020.

c. What is the marginal tax rate on Scott’s bonus?

Solutions

Expert Solution

Solution:

Information Provided In The Question

Qualified Business Income        =        $300000

W-2 Wages                                =        $40000

Unadjusted Property Hold        =        $10000

Taxable Income = $386600

Solution Question A.

Calculation of QBI Deduction
Qualified Business Income $ 300,000.00
20% of QBI $    60,000.00
W-2 Wages $    40,000.00
50 % of W-2 Wages $    20,000.00
QBI Deduction $    40,000.00
Taxable income before QBI Deduction $ 386,600.00
Taxable Income After QBI Deduction $ 346,600.00
Tax Liability $    72,943.00
Income Tax Bracket
From To Rate Defferential Amount Tax
0 19750 10% 10% 346600 34660
19751 80250 12% 2% 326849 6536.98
80251 171050 22% 10% 266349 26634.9
171051 326600 24% 2% 175549 3510.98
326601 414700 32% 8% 19999 1599.92
414701 622050 35% 3% -68101 -2043.03
622051 37% 2% -275451 -5509.02

Solution Question B

Calculation of Tax liability after applying bonus $ 6000

Income Tax Statement
Taxable Income Before Applying QBI $ 386,600.00
Add: Bonus Received $    6,000.00
Gross Total Income $ 392,600.00
QBI Deductions $ 40,000.00
Taxable Income $ 352,600.00
Tax Liability $ 74,863.00

Solution C

Marginal Tax rate = 21%

ekkarill92 answered 1 year ago
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