Question

Robert is the sole shareholder and CEO of ABC, Inc., an S corporation that is a qualified trade or business. During the current year, ABC records net income of $293,000 after deducting Robert's $87,900 salary. In addition to his compensation, ABC pays Robert dividends of $205,100. a. What is Robert's qualified business income? $ b. What is Robert's qualified business income if you determined that reasonable compensation for someone with Robert's experience and responsibilities is $177,900?

Answer 1

Answer:

a. $293,000

b. $203,000

Explanation:

a. What is Robert's qualified business income?

Robert's qualified business income is the net income minus Robert's salary. Since the salary of $87,900 has already been deducted, $293,000 is Robert's qualified business income.

b. What is Robert's qualified business income if you determined that reasonable compensation for someone with Robert's experience and responsibilities is $177,900?

Extra deductible salary = $177,900 - $87,900 = $90,000

New Robert's qualified business income = $293,000 - $90,000 = $203,000