Question

Enna Parker owns and manages her single-member LLC, which provides a wide variety of financial services to her dierits. She is married and will te a joint tax return with her spouse, Paul. Her LLC reports $300,000 of net income, W2 wages of $120,000, and assets with an unadjusted asis of $75,000. Their taxable income before the gel deduction is 3285.000 this is also their modified to come. What is their Seduction for 2019 a $57,000 b. $70,000. 5-0- d. 560,000 None of these choices are correct

Answer 1

Answer: D) 60000

QBI is the net amount of qualified items of income, gain, deduction and loss from any qualified trade or business.It’s a way for individual taxpayers to reduce their tax liability with qualified business income (QBI) they receive from partnerships, S corporations, and sole proprietorships. Only items included in taxable income are counted.The QBI deduction is for business owners. It can be up to 20% of qualified business income (QBI). The deduction can be taken in addition to the usual allowable business expense deductions. Single owner LLC is a pass through-business  so they can avail QBI deduction. She is married and her limit for total taxable income to avail QBI deduction is $315000 a year. Their taxable income before QBI deduction is 285000 so they are eligible.  If the taxable income is exceeding the limit then the limit should apply ,

Your QBI is limited to whichever of these options is the least:

• 20% of your QBI

OR

• 50% of the company’s W-2 wages OR the sum of 25% of the W-2 wages plus 2.5% of the unadjusted basis of all qualified property. You can choose whichever of these two wage tests gives you a greater deduction.

In this case taxable income is within the limit.

Therefore QBI deduction for 2019 = Total qualified income from business * 20%

= 300000 * 20% = $ 60000