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Jason and Paula are married
Jason and Paula are married. They file a joint return for 2020 on which they report taxable income before the QBI deduction of $227,000. 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 generates $170,800 of qualified business income and W-2 wages of $34,000 and has qualified property of $12,500. Paula's partnership reports a loss for the year, and her allocable share of the loss is $37,100. The partnership reports no W-2 wages, and Paula's share of the partnership's qualified property is $9,600.
Assume the QBI amount is net of the self-employment tax deduction.
What is their QBI deduction for the year?
Expert Solution
Taxable income before QBI deduction = $ 227000
So,
W2 wages / capital investment limitation is not applicable to them .
Jason 's QBI amount = $170,800 * 20%
= $ 34160
Paula's QBI amount = - 37100 * 20%
= - 7420
Combined qualified business income amount = $ 34160 + ( - 7420 )
= $ 26740
The overall limitation based on the modified taxable income;
= $ 227000 * 20%
= $ 45400
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