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Problem 9-44 (LO. 6) Donald (a married taxpayer filing jointly) owns a wide variety of commercial...

Problem 9-44 (LO. 6)

Donald (a married taxpayer filing jointly) owns a wide variety of commercial rental properties held in a single-member LLC. Donald's LLC reports rental income of $1,500,000. The LLC pays no W–2 wages; rather, it pays a management fee to an S corporation that Donald controls. The management company pays W–2 wages but reports no income (or loss). Donald's total unadjusted basis of the commercial rental property is $10,000,000. Donald's taxable income before the QBI deduction (and his modified taxable income) is $2,000,000.

What is Donald's QBI deduction for 2019?
$

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Answer #1

Conditions for QBI deductions are shown below:

1. QBI deduction cannot exceed 50% of his share of wages

2. The sum total of 25% of the share of wages and 2.5% of the unadjusted basis of the property is considered immediately after acquiring the qualified property.

The calculation of the QBI deduction is shown below:

QBI deduction = $10,000,000 * 2.5%

= $250,000

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