In the Current Year, the DOE LLC Received Revenues of $200,000

Essay

In the current year, the DOE LLC received revenues of $200,000 and paid the following amounts: $50,000 of business expenses (rent, utilities, wages, depreciation, etc.), a $40,000 guaranteed payment (for services) to 50% member Dave, $10,000 to member Ethan for consulting services, and $10,000 as a distribution to member Olivia. In addition, the LLC earned $2,000 of tax-exempt interest income during the year. Dave is the managing member of the LLC. His basis in his LLC interest was $50,000 at the beginning of the year, which includes a $12,000 share of LLC liabilities. At the end of the year, his share of the LLC's liabilities was $20,000.
a. How much income must Dave report for the tax year and what is the character of the income?
b. What is Dave's basis in his LLC interest at the end of the tax year?
c. On what income will Dave's self-employment tax be calculated?
d. What is the maximum amount Dave might be able to deduct for this business under § 199A? What additional information would Dave need to make this calculation?