Morgan Is a 50% Managing Member in the Calendar Year

question 163

Essay

Morgan is a 50% managing member in the calendar year, cash basis MKK LLC. The LLC received $150,000 income from services and paid the following other amounts. $\begin{array}{lr}\text { Rent expense } & \$ 10,000 \\\text { Salary expense to employees } & 40,000 \\\text { Payment to Morgan for services per the operating agreement } & 40,000 \\\text { Distributions to partners, Kristin and Katie } & 12,000 \\\text { Payment to 30\% cash basis partner Katie for tax and accounting } & 10,000 \\\text { services } &\end{array}$ How much will Morgan's adjusted gross income increase as a result of these items? What other deductions must be considered? What amount will be included in Morgan's self-employment tax calculation?

---

Definitions:

Ace

In card games, an ace refers to a playing card that typically ranks the highest in its suit.

Lowest 4%

Refers to the bottom 4% of data points in a distribution, highlighting the far left end of the data spectrum or values significantly below the median.

Lowest 40%

Refers to the bottom forty percent of a distribution or set of data points, often discussed in the context of income or wealth distributions.

Z > 0.59

A condition specifying that the value of the Z-score in a statistical analysis is greater than 0.59, often related to standard deviation measurements in normal distribution.