Question

Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $100,000 of business income from WCC for the year. Jacob's marginal income tax rate is 37 percent. The business allocation is subject to 29 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?

Answer 1

Jacob will owe $29,900 in tax on the income allocation if the income is not qualified business income.

Step-by-step explanation:

The amount of tax Jacob will owe on the income allocation can be calculated by considering the self-employment tax and the additional Medicare tax. First, the self-employment tax is calculated by multiplying the business income by the self-employment tax rate (29%). So, the self-employment tax owed by Jacob is $100,000 * 29% = $29,000.The additional Medicare tax is calculated by multiplying the business income by the additional Medicare tax rate (0.9%). So, the additional Medicare tax owed by Jacob is $100,000 * 0.9% = $900.To calculate the total tax owed, we add the self-employment tax and the additional Medicare tax: $29,000 + $900 = $29,900.Therefore, Jacob will owe $29,900 in tax on the income allocation if the income is not qualified business income.