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Ellie (a single taxpayer) is the owner of ABC, LLC. The LLC (a sole proprietorship) reports of $900,000 and is not a specifie

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Answer #1

ANSWER

Option(B)=$148,000

Explanation

Step - (1)

Ellie's is the owner of ABC LLC.

The LLC reports QBI of $900000 and is not a "specified services" business.

ABC paid total W–2 wages of $300000, and the total unadjusted basis of qualified property held by ABC is $30,000.

Ellie's taxable income before the QBI deduction is $740,000

Step - (2)

As Ellie's taxable income before the QBI deduction exceeds the $207,500 threshold, the W–2 Wages/Capital Investment Limit must be considered.

Ellie's QBI deduction for 2019 is $148,000.

1. 20% of QBI = ($900,000 * 20%) $180,000
2. But no more than the greater of:

50% of W-2 wages = ($300,000 * 50%), or

 $150,000

25% of W-2 wages + 2.5% of the unadjusted basis of qualified property

= ($300,000 * 25%) + ($30,000 * 2.5%)

= $75,750

 $75,750

And, no more than:
3. 20% of modified taxable income = ($740000 * 20%)   $148,000

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