Morgan Is a 50% Managing Member in the Calendar Year

Essay

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. $\begin{array}{lr}\text { Rent expense } & \$ 10,000 \\\text { Salary expense to employees } & 40,000 \\\text { Payment to Morgan for services per the operating agreement } & 40,000 \\\text { Distributions to partners, Kristin and Katie } & 12,000 \\\text { Payment to 30\% cash basis partner Katie for tax and accounting } & 10,000 \\\text { services } &\end{array}$ 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?