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Gene is the CEO and sole owner of a music themed amusement park called Hug World LLC, which is a disregarded entity and a cash basis tax payer. While Gene is the sole owner of the park, the land that the park is built on is owned by a partnership, in which Gene and his friends, Ace, Paul, and Peter, who are each equal partner. The park pays the partnership rent for use of the land. During the year, the amusement park had $18,500,000 in revenue. Additionally, it had numerous expenses to run the park, as shown below.
Salaries-
Maintenance-
Food-
State & Local Taxes
Health Insurance
Employee Retirement contributions
Group Term Life Insurance Prem
Rent$ 7,000,000
$2,000,000
$1,000,000
$750,000
$2,500,000
$225,000
$75,000
$3,000,000
Personally, Gene received the following cash flows. As CEO of the LLC, Gene received a salary of $2,000,000 in cash. He also owned US government bonds which paid him $100,000 in income during the year. Finally, he also maintained a brokerage account that held the following assets. Boeing Stock that was purchased on June 6, for $200,000 and was sold on October25, for $195,000. This stock paid him a dividend of $10,000 on October 30, with a record date of October 12. Additionally, he owned shares of the Brazilian oil company Petrobras, which paid him $10,000 in dividends, which he owned at the end of the year.
Finally, Gene had the following expenses
Mortgage Principal Paid
Mortgage Interest
Student Loan Interest
State Taxes
Real Estate Taxes
Charitable Contributions$500,000
$200,000
$20,000
$200,000
$50,000
$10,000
Gene comes to you regarding his Federal Income tax liability. Please advise him in regards to his rights and liabilities regarding his situation.
