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Nonamiya [84]
3 years ago
9

Alicia is the sole shareholder and CEO of ABC, Inc., an S corporation that is a qualified trade or business. During the current

year, ABC has net income of $325,000 after deducting Alicia’s $100,000 salary. In addition to her compensation, ABC pays Alicia dividends of $250,000. After reviewing comparable companies, you determine that reasonable compensation for someone with Alicia’s experience and responsibilities is $200,000. What is Alicia’s qualified business income?
Business
1 answer:
Advocard [28]3 years ago
3 0

Answer: $225,000

Explanation:

Given that,

Net income = $325,000

Alicia’s salary = $100,000

Dividends = $250,000

Reasonable compensation = $200,000

Actual Reasonable compensation = Reasonable compensation - Alicia’s salary

                                                         = $200,000 - $100,000

                                                         = $100,000

Alicia’s qualified business income = Net income - Actual Reasonable compensation

                                                         = $325,000 - $100,000

                                                         = $225,000

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