Lenny is the sole shareholder of an S corporation. Each year, he draws a salary and receives a distribution of profits from the corporation. Which of the following statements is TRUE? Lenny's share of the profits will not besubject to social security or medicare taxes. Lenny's salary will be treated as self-employment income and must be reported on Schedule C. Lenny will pay income taxes only on the portion of the profits that he actuallydistributes to himself. Lenny may determine his salary by selecting the amount that provides him the greatest tax benefit, regardless of the market rate for the services he provides.

S Corporation -An S corp is a type of business structure that allows for pass-through to…

Answered: Lenny is the sole shareholder of an S…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Clarence is an employee at the Drake Candy Corporation, an S corporation. Clarence and other employees are covered under a disability income plan that will pay him 50% of his $96,000 salary if he becomes disabled. The company adds the pro rata cost of the plan to each employee's W-2. Clarence is in the 25% income tax bracket. What is the amount of monthly disability benefits Clarence will receive after tax if he remains in the same tax bracket when disabled? 1. $2,250. 2. $3,000. 3. $3,500. 4. $4,000. Ⓒ$4,000. $3,500. $2,250. Ⓒ$3,000.
Mary is the sole shareholder of corporation ABCD. She would like to use some of the profit of the business for personal use. Each of the following describes a legal way for Mary to withdraw funds from ABCD except: (a) Mary pays her personal use from the corporation's funds, (b) Mary receives taxable wages from ABCD, (c) ABCD lends fund to Mary with reasonable interest rate and repayment schedule, (d) ABCD pays Mary a taxable dividend.
Abel's employer provides Abel with a group life insurance benefit. Abel irrevocably transferred the group life insurance policy and all of the attendant incidents of ownership to his brother, Cain. Cain changed the beneficiary on the policy to himself. The $50,000 policy was paid to Cain upon Abel's death. How much is includible in Abel's gross estate?
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Discuss the law that applies to this issue and then answer the questions at the end of the paragraph.
This answer is wrong . please give me the right answer.
The Blue Corporation, a C corporation, is owned 100% by Tim Morgan and had taxable income in 2019 of $535,000. Tim is also an employee of the corporation. In December 2019, the corporation has decided to distribute $450,000 to Tim and has asked you whether it would be better to distribute the money as a dividend or salary. Tim, a single taxpayer, is in the 37% marginal tax bracket. How would you respond to Blue Corporation? Consider only income taxes for this problem. (Tim's taxable income exceeds $434,550.) LOADING... Calculate the taxes for Blue and Tim under each option. (For the purpose of this analysis, we will only consider the marginal and capital gain rates for Tim. Ignore additional taxes imposed on high income taxpayers.) Distributed as dividend Distributed as salary Taxes for Blue Taxes for Tim Total tax liability Enter any number in the edit fields and then click Check Answer.…
Gina owns all of Cherry Corporation's stock. Cherry pays her a $74,000 salary, which reduces its before-tax profit to $21,000. Cherry distributes all of its after-tax income to its shareholder, Gina. Gina is married, and her spouse receives $82,000 of salary from an unrelated employer. They file jointly, have $31,500 of itemized deductions, and have no dependents. Compute the total income tax that is paid. Ignore payroll taxes. (The tax year is 2022) View the standard deduction amounts. View the 2022 tax rate schedule for the Married filing jointly filing status. Read the requirement. a. Compute the total income tax that would be paid assuming Cherry is an S corporation. Ignore payroll taxes. Begin by calculating taxable income for Gina under this scenario. S corporation income Salaries Adjusted gross income Minus: 74,000 82,000 156,000 Qualified business income deduction Itemized deductions Taxable income 0 31,500 124,500 Now enter the income tax that would be paid by Gina and the…
Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $90,000 of business income from WCC for the year. Jacob's marginal income tax rate is 37 percent. The business allocation is subject to 2.9 percent of self-employment tax and 0.9 percent additional Medicare tax. a. What is the amount of tax Jacob will owe on the income allocation if the income is not qualified business income? b. What is the amount of tax Jacob will owe on the income allocation if the income is qualified business income (QBI) and Jacob qualifies for the full QBI deduction?
in 2023 (for 2022 tax returns filed in 2023), Taxpayer X and Taxpayer Y each agree to pay their tax preparer, Randy, from the refund they receive from the IRS. Upon presenting their refund checks to Randy, Randy pays them the difference in cash. Randy then endorses both checks and deposits them into his account. Randy has a Power of Attorney for Taxpayer X, but no Power of Attorney for Taxpayer Y. A. Randy is subject to a penalty of $110 B. Randy is subject to a penalty of $55 C. Randy is a subject to a penalty of $560 D. Randy is a subject to a penalty of $1,120
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In 2023, Jack, age 12, has interest income of $6,540 on funds he inherited from his aunt and no earned income. He has no investment expenses. Christian and Danielle (his parents) have taxable income of $88,150 and file a joint return. Assume that no parental election is made. Click here to access the 2023 tax rate schedule. If required, round the tax computations to the nearest dollar. Jack's net unearned income is Jack's allocable parental tax is Jack's total tax is 2,200 X 264 X. 264 X.

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