Question

Jason and Paula are married. They file a joint return for 2019 on which they report taxable income before the QBI deduction of $200,000. 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 $150,000 of net income, W-2 wages of $45,000, and has qualified property of $50,000. Paula's partnership reports a loss for the year, and her allocable share of the loss is $40,000. The partnership reports no W-2 wages and Paula's share of the partnership's qualified property is $20,000. What is their qualified business income deduction for the year

Answer 1

Check the explanation

Step-by-step explanation:

A)

Jason and Paula’s taxable income before the QBI deduction=$200,000. Therefore,W2 wages/capital investment limitation is not applicable to them.

Jason’s QBI amt=$30,000 ($150,000 x 20%).

Paula’s QBI amount= $(8,000) [$(40,000) x 20%]. Their combined qualified business income amount is $22,000 [$30,000+$(8,000)]. As this amount is less than the overall limitation based on modified taxable income ($200,000 x 20% = $40,000), their QBI deduction is $22,000.

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Answer 2

Their QBI deduction is $22,000

Step-by-step explanation:

According to the given data Jason and Paula’s taxable income before the QBI deduction=$200,000.

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

Jason’s QBI amt=$30,000 ($150,000 x 20%).

Paula’s QBI amount= $(8,000) [$(40,000) x 20%].

Therefore, Their combined qualified business income amount= [$30,000+$(8,000)]=$22,000

As this amount is less than the overall limitation based on modified taxable income ($200,000 x 20% = $40,000), their QBI deduction is $22,000