Mason owns 45% of an S corporation that reported net income of $105,000 for the year.During the year, $20,000 was distributed to Mason from the corporation.Assuming Mason's QBI deduction is not limited, how much is the net amount that Mason is taxed on this year as a result of his investment in the S corporation?
A)$16,000
B)$37,800
C)$45,000
D)$53,800

Question

Quizplus · Accepted Answer

Mason's share of the S corporation's net income is 45% of $105,000, which equals $47,250. Since S corporation distributions do not affect the taxable income (they are not double-taxed like C corporation dividends), Mason is taxed on his share of the net income, which is $47,250. However, with the QBI deduction (20% of QBI), his taxable amount is reduced by 20% of $47,250, which is $9,450. Therefore, $47,250 - $9,450 = $37,800 is the net amount Mason is taxed on.

Mason Owns 45% of an S Corporation That Reported Net