In 2018, William Wallace's sole proprietorship, Western Wear Apparel, generated $140,769 Schedule C net profit ($130,000 net earnings from self-employment). In addition, William recognized a $25,000 Section 1231 gain on a sale of land formerly used by the business as a parking lot. The business checking account earned $250 interest income. William qualifies for the Section 199A deduction without regard to the wage limitation.
a. Which of these income items are subject to self-employment tax?
b. Compute Williams' 2018 self-employment tax, assuming he has no other earned income.
c. Compute the total increase in William's 2018 taxable income attributable to his business.

Question

Quizplus · Accepted Answer

The Answer of In 2018, William Wallace's sole proprietorship, Western Wear Apparel, generated $140,769 Schedule C net profit ($130,000 net earnings from self-employment). In addition, William recognized a $25,000 Section 1231 gain on a sale of land formerly used by the business as a parking lot. The business checking account earned $250 interest income. William qualifies for the Section 199A deduction without regard to the wage limitation.
a. Which of these income items are subject to self-employment tax?
b. Compute Williams' 2018 self-employment tax, assuming he has no other earned income.
c. Compute the total increase in William's 2018 taxable income attributable to his business.

In 2018, William Wallace's Sole Proprietorship, Western Wear Apparel, Generated