Moses is a 20% partner in an auto parts store where he works full-time. His share of the partnership income is $70,000, which is also his net-self-employment income.
I.Moses must pay self-employment tax at the rate of 15.3% on 92.35% of the partnership income.
II.Moses is allowed a deduction for AGI for 50% of the self-employment tax he pays during the year.

Question

Moses is a 20% partner in an auto parts store where he works full-time. His share of the partnership income is $70,000, which is also his net-self-employment income.
I.Moses must pay self-employment tax at the rate of 15.3% on 92.35% of the partnership income.
II.Moses is allowed a deduction for AGI for 50% of the self-employment tax he pays during the year.
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Quizplus · Accepted Answer

Statement I is correct. Self-employment tax is calculated on 92.35% of the partnership income (as 7.65% is attributed to the employer's share) and the rate is 15.3%.

Statement II is also correct. Moses can take a deduction for 50% of the self-employment tax he pays as an adjustment to income (i.e., above-the-line deduction) on his tax return.

Moses Is a 20% Partner in an Auto Parts Store