Question

Jocelyn earned $275,000 of qualified business income this year from her sole proprietorship and has taxable income, before any QBI deduction, of $250,000. Janice is permitted a QBI deduction of O $35,000 $55,000 $50,000 $0

Answer 1

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Jocelyn QBI Deduction =

Lesser of the following two options:

i. 20% of QBI from businesses including sole proprietorship

= $275,000 × 20%

= $55,000

ii. 20% of Taxable Income – Net Capital Gain

= ($250,000 × 20%) – 0

= $50,000

∴ Jocelyn QBI Deduction = $50,000

DO NOTE: The question asks “Janice” permitted QBI Deduction which is = $0 since no other information relating to the same is provided for her.