Problem
Omar (single) is a 50 percent owner in Cougar LLC (taxed as a partnership). Omar works half time for Cougar and receives guaranteed payment of $50,000. Cougar LLC reported $450,000 of business income for the year (2022). Before considering his 50 percent business income allocation from Cougar and the self-employment tax deduction (if any), Omar's adjusted gross income is $210,000 (includes $50,000 guaranteed payment from Cougar and $160,000 salary from a different employer). Omar reports itemized deductions of $40,000. Answer the following questions for Omar.
I. Assume the original facts and that the business income allocated to Omar is not from a specified service. What is Omar's deduction for qualified business income? Assume that 81.82 percent of the self-employment tax is from self-employment income included in QBI [i.e., $225,000 business income allocation/$275,000 (business income allocation plus guaranteed payment)]. That is, the $50,000 guaranteed payment is not qualified business income. Ignore the wage-based limitation.
II. What is Omar's net investment income tax liability (assume no investment expenses)?