Question

William is a general partner in the WST partnership. During the current year, he receives a guaranteed payment of $10,000 for services he provides to the partnership, and his distributive share of partnership income is $30,000. William is required to pay self-employment tax on the $10,000 guaranteed payment but not on his distributive share of partnership income.

Answer 1

The discussion focuses on the tax burdens of a general partner receiving guaranteed payments and the decision-making process of a single father balancing work and welfare benefits. It addresses the specific taxes a self-employed individual without incorporation would pay and evaluates the nature of the social security tax.

Step-by-step explanation:

The question revolves around self-employment tax obligations for individuals who are general partners, like William, receiving both guaranteed payments and distributive shares from a partnership. In the case of Jonathon, a single father who is deciding between work and welfare, the scenario illustrates the impact of earned income on government assistance and the resulting total income. To summarize Jonathon's financial options, his earnings from work, government benefits, and total income are analyzed through a detailed table and a labor-leisure diagram, illustrating the trade-offs between working and leisure time when government support is factored in.

As for the types of taxes applicable to a self-employed individual, they would be subject to corporate income tax (if applicable), individual income tax, and the full amount of payroll taxes, including both the employee and employer portions. The social security tax rate mentioned is 6.2%, applied to earnings below a specified threshold which is conducive to discussions regarding the progressive, regressive, or proportional nature of this tax.