Question

Roquan, a single taxpayer, is an attorney and practices as a sole proprietor. This year, Roquan had net business income of $90,000 from his law practice (net of the associated for AGI self-employment tax deduction). Assume that Roquan pays $40,000 in wages to his employees, has $10,000 of property (unadjusted basis of equipment he purchased last year), and has no capital gains or qualified dividends. His taxable income before the deduction for qualified business income is $100,000.

1. Calculate Roquan's deduction for qualified business income.
2. Assume the same facts as earlier, except Roquan's taxable income before the deduction for qualified business income is $300,000.

Answer 1

A. $18,000

B. No QBI deduction

Step-by-step explanation:

a) Calculation for Roquan’s deduction for qualified business income.

Using this formula

Roquan's qualified business income.

= 20% x QBI

Let plug in the formula

Roquan's qualified business income

= 20% x $90,000

Roquan's qualified business income= $18,000

Therefore Roquan’s deduction for qualified business income will be $18,000

b) Based on the information given if we assumed that Roquan's taxable income before the deduction for qualified business income is the amount of $300,000 which means that Roquan's income is higher than the amount of $213,300 hence, NO qualified business income deduction (QBI) will be allowed.