Moses Is a 20% Partner in an Auto Parts Store

question 1

Multiple Choice

Moses is a 20% partner in an auto parts store where he works full-time. His share of the partnership income is $70,000, which is also his net-self-employment income.
I.Moses must pay self-employment tax at the rate of 15.3% on 92.35% of the partnership income.
II.Moses is allowed a deduction for AGI for 50% of the self-employment tax he pays during the year.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Par Value

The nominal value of a bond, share of stock, or coupon as stated by the issuer, often used as a legal face value.

Common Stock

Holding shares in a company grants investors a portion of ownership, allowing them to vote on corporate matters and receive a portion of the profits via dividends.

Additional Paid-in Capital

The amount of equity capital that is invested in a company by shareholders over and above the par value of the shares.

Professional Corporation

A type of corporation typically formed by lawyers, doctors, and other professionals, where the company acts under corporate status but allows its members to maintain professional liability.