FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Rob Wriggle operates a small plumbing supplies business as a sole proprietor. In 2019, the plumbing business has gross business income of $421,000 and business expenses of $267,000, including wages paid of $58,000. The business sold some land that had been held for investment generating a long-term capital gain of $15,000. The business has $300,000 of qualified business property in 2019. Rob's wife, Marie, has wage income of $250,000. They jointly sold stocks in 2019 and generated a long-term capital gain of $13,000. Rob and Marie have no dependents and in 2019, they take the standard deduction of $24,400.

The income threshold for QBI limitations starts at $321,400 for married filing jointly taxpayers.

a.  What is Rob and Marie's taxable income before the QBI deduction?
$407,600

b.  What is Rob and Marie's QBI?
$154,000

c.  What is Rob and Marie's QBI deduction?
$29,248

 

complete Form 8995-A to report Rob’s QBI deduction.

 2 Qualified business income from the trade, business, or aggregation. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 154000    
  3 Multiply line 2 by 20% (0.20). If your taxable income is $160,700 or less ($160,725 if married filing separately; $321,400 if married filing jointly), skip lines 4 through 12 and enter the amount from line 3 on line 13 . . . . 3 30800    
  4 Allocable share of W-2 wages from the trade, business, or aggregation . . . 4 58000    
  5 Multiply line 4 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 29000    
  6 Multiply line 4 by 25% (0.25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 14500    
  7 Allocable share of the unadjusted basis immediately after acquisition (UBIA) of all qualified property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 300000    
  8 Multiply line 7 by 2.5% (0.025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7500    
  9 Add lines 6 and 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 22000    
  10 Enter the greater of line 5 or line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 29000    
  11 W-2 wage and qualified property limitation. Enter the smaller of line 3 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 29000    
  12 Phased-in reduction. Enter amount from line 26, if any. See instructions 12      
  13 Qualified business income deduction before patron reduction. Enter the greater of line 11 or line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13      
  14 Patron reduction. Enter the amount from Schedule D (Form 8995-A), line 6, if any . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14      
  15 Qualified business income component. Subtract line 14 from line 13 15      
  16 Total qualified business income component. Add all amounts reported on line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .► 16  
17 Enter amounts from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17   30800        
  18 Enter the amounts from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18   29000        
  19 Subtract line 18 from line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19   1800        
  20 Taxable income before qualified business income deduction . . . . . . . . . . . . . . . . . . 20            
  21 Threshold. Enter $160,700 ($160,725 if married filing separately; $321,400 if married filing jointly) . . . . . . . . . . . . . . . 21   321400        
  22 Subtract line 21 from line 20 . . . . . . . . . . 22            
  23 Phase-in range. Enter $50,000 ($100,000 if married filing jointly) . . . . . . . . . . . . . 23   100000        
  24 Phase-in percentage. Divide line 22 by
line 23 . . . . . . . . . . . . . . . . . . . . . . . .
24            
  25 Total phase-in reduction. Multiply line 19 by line 24 . . . . . . . . . . . . 25            
  26 Qualified business income after phase-in reduction. Subtract line 25 from line 17. Enter this amount here and on line 12, for the corresponding trade or business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26            
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