What amount of federal income tax would the business

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Reference no: EM132176416

Question - Britta and Sheila plan to form a consulting Business in 2018. Britta will contribute $66000 in exchange for a 33% ownership interest and Shelia will contribute $134000 in exchange for a 67% ownership interest. The Business will also borrow $80,000 from Bank to pay for its start-up costs. Britta and Sheila will both actively manage the consulting business. Their business plan projects $650000 of profits annually. Neither Britta nor Sheila will draw salary, but the business plan includes total annual distribution of $250,000 to Britta and Sheila at the end of the year. The distribution is allocated pro rate based on ownership percentage. Britta and Sheila's only source of income and education is from the consulting business operations. Britta is single and Sheila is married to john. Britta and John file jointly. John is a stay at home dad and has no source of income.

Assume the business plan are accurate in 2018 and the consulting business is organized s a General partnership, what amount of federal income tax would the business, Britta and Sheila each pay in 2018 from the consulting business operations? Only consider income taxes in your computation (i.e. ignore payroll tax and NIIT). Please show your work and explain your calculation.

Reference no: EM132176416

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