In the Current Year, the DOE LLC Received Revenues of $200,000

question 28

Essay

In the current year, the DOE LLC received revenues of $200,000 and paid the following amounts: $50,000 of business expenses (rent, utilities, wages, depreciation, etc.), a $40,000 guaranteed payment (for services) to 50% member Dave, $10,000 to member Ethan for consulting services, and $10,000 as a distribution to member Olivia. In addition, the LLC earned $2,000 of tax-exempt interest income during the year. Dave is the managing member of the LLC. Dave's basis in his LLC interest was $50,000 at the beginning of the year, and includes a $12,000 share of LLC liabilities. At the end of the year, his share of the LLC's liabilities was $20,000.
a. How much income must Dave report for the tax year and what is the character of the income?
b. What is Dave's basis in his LLC interest at the end of the tax year?
c. On what income will Dave's self-employment tax be calculated?
d. What is the maximum amount Dave might be able to deduct for this business under [section symbol] 199A? What additional information would Dave need to make this calculation?

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Definitions:

Hierarchy Of Needs

A motivational theory in psychology comprising a five-tier model of human needs, depicted as hierarchical levels within a pyramid.

Traits

Relatively stable tendencies of individuals.

Motives

The psychological entities that drive us to behave in ways that will help us meet our goals.

Self-Esteem

A person's subjective emotional judgement regarding their self-value.