Exam 10: Partnerships: Formation, Operations, and Basis

The qualified business income deduction is calculated at the partner level. The partnership reports information the partner needs to calculate the deduction, such as W-2 wages and the unadjusted basis of the partnership's depreciable property.

A partnership must provide any information to the partners that they would need to calculate deductions not permitted at the partnership level, such as for oil and gas depletion or the corporate dividends received deduction.

Morgan is a 50% managing member in the calendar year, cash basis MKK LLC. The LLC received $150,000 income from services and paid the following other amounts. Rent expense \ 10,000 Salary expense to employees 40,000 Payment to Morgan for services per the operating agreement 40,000 Distributions to partners, Kristin and Katie 12,000 Payment to 30\% cash basis partner Katie for tax and accounting 10,000 services How much will Morgan's adjusted gross income increase as a result of these items? What other deductions must be considered? What amount will be included in Morgan's self-employment tax calculation?