Assume the tax payer is married filing a joint return. ACCT 540 Assignment 1 A b

Question

Assume the tax payer is married filing a joint return. ACCT 540 Assignment 1 A business generate a certain amount of income that is classified as "qualified business income" (QBI) for purposes of Section 199A. The taxpayer seeking to claim a qualified business income deduction (QBID) has taxable income as shown below. The business is a service business or a non-service business as shown below. In each situation, the W-2 wages paid are $100,000 and the UBIA is $500,000 REQUIRED: Complete the blanks in the table for the allowed QBID. Situatio QB Taxable IncomeAllowed Business? QBD $200,00 Yes $285,000 200,00No 0 200,00 Yes 325,000 325,000 $355,000 $355,000 $385,000 $385,000 $425,000 $425,000 $200,00 No $200,00Yes 200,00No 200,00 Yes 0 200,00No 200,00Yes $200,00 No

Explanation / Answer

Since tax payer is filing joint return. So if business income is below 315000 ( jointly) , he will be eligible for such deduction. however if income exceeds this amount deduction will be given subject to certain conditions i. e. the deduction amount willl be limited to the amount of w2 wages and UBIA.

Also no deduction will be available if it is an specified service business and taxable income exceeds 315000 (jointly).

Deduction available will be lower of :-

Also if taxable income exceeds 415000 in a non service business , deduction will be lower of

Situation QBI ($) Service ? Taxable income Allowed QBI A 200000 YES 285000 40000 B 200000 NO 285000 100000 C 200000 YES 325000 36000 D 200000 NO 325000 40000 E 200000 YES 355000 24000 F 200000 NO 355000 40000 G 200000 YES 385000 12000 H 200000 NO 385000 40000 I 200000 YES 425000 NIL J 200000 NO 425000 40000

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