Question

Jason and Paula are married. They file a joint return for 2019 on which they report taxable income before the QBI deduction of $277,000. Jason operates a sole proprietorship, and Paula is a partner in the PQRS Partnership. Both are a qualified trade or business, and neither is a specified services business. Jason's sole proprietorship reports $174,400 of qualified business income, reports W–2 wages of $57,600, and owns qualified property of $13,000. Paula's partnership reports a loss for the year, and her allocable share of the loss is $32,700. The partnership reports no W–2 wages, and Paula's share of the partnership's qualified property is $9,600.What is their QBI deduction for the year?

Answer 1

$28340

Step-by-step explanation:

Jason and Paula’s taxable income before the QBI deduction=$277,000.

Therefore,W2 wages/capital investment limitation is not applicable to them.

Jason’s QBI amt=$34,880 ($174,400 x 20%).

Paula’s QBI amount= $(6540) [$(32700) x 20%].

Their combined qualified business income amount is $28340 [$34880+$(6540)].

As this amount is less than the overall limitation based on modified taxable income ($277,000 x 20% = $55,400), their QBI deduction is $28340.