During 2013,Eleanor earns $120,000 in wages as an employee of an accounting firm.She also earns $13,000 in gross income from an outside consulting service she operates.Deductible expenses paid in connection with the consulting service amount to $3,000.Eleanor also has a recognized long-term capital gain of $1,000 from the sale of a stock investment.She must pay a self-employment tax on:

Question

Quizplus · Accepted Answer

Eleanor's self-employment income is calculated as her outside consulting service gross income ($13,000) minus her deductible business expenses ($3,000), which equals $10,000. She must pay self-employment tax on this amount, which is currently 15.3%. Therefore, the self-employment tax owed would be $1,530 ($10,000 x 0.153), which makes choice B the correct answer.

During 2013,Eleanor Earns $120,000 in Wages as an Employee of an Accounting