a. Keith Thomas and Trent Brooks began a new consulting business on January 1, 2020. They organized the business as a C corporation, KT, Inc. During 2020, the corporation was successful and generated revenues of $2 million. KT had operating expenses of $800,000 before any payments to Keith or Trent. During 2020, KT paid dividends to Keith and Trent in the amount of $350,000 each. Assume that Keith’s wife earned $130,000 from her job, they file a joint return, have itemized deductions of $40,000, and have no children. Compute the total tax liability of KT, Inc. and Keith and his wife for 2020. Ignore the net investment income tax
My work so far::::
Tax liability of KT:
Gross income: 2,000,000
Minus: operating expenses: 800,000
= 1,200,000 (taxable income)
* I am not sure where to go from here* How do I find the corporate tax? please explain
Tax liability of Keith and his wife
Salary income: 130,000
Plus Dividend income: 350,000
= Adjusted gross income: 480,000
Minus deductions 40,000
=440,000 Taxable income
*** I am not sure where to go from here*** How do I find the total tax? please explain
B:
b. Instead of organizing the consulting business as a C corporation, assume Keith and Trent organized the business as a limited liability company, KT, LLC. KT made a distribution of $350,000 each to Keith and Trent during 2020. Compute the total tax liability of KT, LLC and Keith for 2020. Ignore any additional tax on net investment income, and ignore the qualified business income deduction.
Total tax liability of KT
Total tax liability of Keith
Expert comment: what more information is needed?
