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

See similar textbooks

Similar questions

Bruce is single and has adjusted gross income for the current year of $90,000 before any deduction for passive activity losses. He owns a duplex that he uses as rental property and this year his rental loss was $13,000. Bruce has no income from passive activities. Which of the following statements is true? Group of answer choices If Bruce actively participates in managing the rental property he can deduct the $13,000 loss against his other income. Bruce will not be able to deduct the $13,000 loss against his other income unless he materially participates in managing the property. Since Bruce’s income does not exceed $150,000 he can deduct the loss against his other income regardless of his role in managing the property. In no circumstance will Bruce be able to deduct the loss this year since he does not have any passive income.
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.
A married taxpayer files a separate tax return from his wife and does not participate in an employer-sponsored retirement plan at work. The taxpayer has moved out of the couples' home, but lived with his spouse part of the year. The taxpayer cannot deduct any contributions he makes to his traditional IRA if his modified AGI exceeds $_______________?
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?
Which of the following would constitute tax evasion? a. Henry salary sacrifices future income for which services have not already been provided into superannuation. b. Emily defers prepayments of income to a later income year. c. Jane does not include $50 of interest from her bank account on her tax return. d. Jia establishes a family trust and distributes income between family members equally.
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…
Doug and Tammy are not related and do not live together. Doug is employed and earns commission income. Tammy is an independent broker and earns commission income. Both maintain an office in their homes. Which of the following statements is false regarding the tax treatment of their incomes for 2020? (a) Tammy can incur a non-capital loss, but Doug cannot. (b) Tammy and Doug can deduct a portion of their property tax and house insurance (c) Tammy can deduct a portion of her home mortgage interest, but Doug cannot. (d) Tammy and Doug can claim CCA on their computers.
Rodrigo works as a self-employed salesperson. His job requires that he spend most of his time outside the office calling on customers. In addition, to supplement his income, he works 1 night a week and on weekends as a waiter at an exclusive seafood restaurant in the city. During the year, he keeps the following record of his travel: Miles Home to office 850 Office to home 425 Office to restaurant 300 Restaurant to home 1,200 Home to restaurant 725 Office to custormers' office 7,100 Customers' office to restaurant 400 Total miles 11,000 If he uses the standard mileage rate, what amount can she deduct as a business automobile expense? Oa. S4255.00 Ob. $431250 Oc. S4,082 50 Od. $5,175.00 Oe, S4,485.00

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS