Joanne is married filing a joint return. Joanne owns a CPA firm and accounting is a...

Joanne is married filing a joint return. Joanne owns a CPA firm and accounting is a specified service. The firm has with QBI of 200,000. W-2 wages of the business was $150,000 and the total basis of property held in the business was $30,000. Her taxable income before her QBI deduction was $240,000 (which was also her modified taxable income). What is Ashley’s QBI deduction? Assume that Ashley’s spouse earned $300,000 raising their taxable income and MTI to $540,000. What would Ashley’s qualified business deduction be now?

Solutions

Expert Solution

You must calculate your limitation if:

You have ownership interest in a qualified trade or business

AND

Your taxable income is more than $315,000 as a married filing jointly taxpayer or more than $157,500 as a single taxpayer

If your taxable income is less than these amounts, you don’t have to calculate the limitation. You can just take the straight 20% deduction.

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

20% of your QBI

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, Joanne is married. Her filing status is married filing jointly. She owns a CPA firm and accounting is a specified business that generates $200,000 of QBI.

Her taxable income is $3,00,000. The business paid $ 1,50,000 in wages and has $30,000 in qualified property.

her taxable income was less than $315,000, her QBI deduction could have been $20,000 (20% x $100,000

However ,if the taxable income more than USD 3,15,000 , She has to calculate her limitation. She performs both wage tests to find the greatest deduction.

Test 1: 50% of the company’s W-2 wages

50% x $150,000 = $75,000

Test 2: 25% of the W-2 wages plus 2.5% of the unadjusted basis of all qualified property

(25% x $150,000) + (2.5% x $30,000) = $38,250

Mary chooses the greater deduction, so her total QBI deduction amount is $75,000.

Therefore Ashley's qualified business deduction is USD 20,000.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Phil & Susan, each age 60, are married filing a joint return. They have no...

Phil & Susan, each age 60, are married filing a joint return. They have no dependents. Susan has wages of $34,000. Phil doesn’t work due to a disability, but he’s a buyer and seller of stocks on the internet. The couple’s stock transactions for the year are detailed below. They also had $2,300 of qualifying dividends. Fill in the last 2 columns in the table below. Security or fund* Date acquired Date sold Cost Sale price Gain or loss...

Joseph and Maxie Stottlemyre are married and filing a joint tax return. Their taxable incomes for...

Joseph and Maxie Stottlemyre are married and filing a joint tax return. Their taxable incomes for the year were $27,522 (Joseph) and $24,074 (Maxie). Their W-2 forms show that they already have paid $8315in income taxes for the year. Are they correct in assuming that they will receive a tax refund? If so, how much will it be? Otherwise, how much will they still owe? (10) 11. Would Joseph and Maxie have paid more or less tax if they had...

Woody and Ruby are married and filing a joint return. They have combined wages of $135,000...

Woody and Ruby are married and filing a joint return. They have combined wages of $135,000 in 2020. The couple's 2020 stock transactions are detailed in the following table. In addition, they have $6,200 of qualifying dividends. Item Date Acquired Date Sold Cost Sales Price Apple stock 02/10/19 01/14/20 $9,000 $5,000 Peach stock 04/23/18 01/05/20 $7,500 $3,000 Cherry stock 10/01/15 03/31/20 $13,000 $19,000 Banana stock 03/31/19 02/18/20 $22,000 $17,000 Orange stock 10/15/19 10/07/20 $9,000 $17,500 Plum stock 09/22/18 05/02/20 $2,000...

Margaret, a married taxpayer filing a joint return, engaged in two business activities this year. Business...

Margaret, a married taxpayer filing a joint return, engaged in two business activities this year. Business A earned $470,000 of profit. Business B incurred a loss of $(995,000). Required: How much of Margaret's net business loss is not currently deductible?

Tala, who is married and filing joint return, received $30,000 interest and dividend income in 2019....

Tala, who is married and filing joint return, received $30,000 interest and dividend income in 2019. She also received $10,000 interest from municipal bonds. Her MAGI for 2019 is $58,000. How much of her social security benefit is taxable? Naser and Suzan, who are married and file a joint return, have AGI for the current year (2019) of $42,000. In addition, they received tax-exempt interestincome of $6,000 and Social Security benefits of $15,000. The Social Security benefits to be excluded...

Mikey and Sal, married taxpayers filing a joint return, paid state income tax of $12,000 and...

Mikey and Sal, married taxpayers filing a joint return, paid state income tax of $12,000 and other itemized deductions of $15,000 in 2020. Because the total of their allowable itemized deductions exceeded the standard deduction, they elected to itemize deductions on their 2020 federal income tax return rather than to claim the standard deduction. In May 2021, Mikey and Sal receive a refund of $1,000 for overpaid state income taxes paid in 2020. Under the tax benefit rule, how much...

Rebecca and Gregory, a married couple filing a joint return, reported adjusted gross income $70,000 and...

Rebecca and Gregory, a married couple filing a joint return, reported adjusted gross income $70,000 and total allowable itemized deductions of $13,000, including $3,100 for state income taxes, in 2017. They received a $900 refund of state income taxes in April 2018. How much of the state income tax refund must be included in their income and in which year do they include it?

lIn Year 1, Jeff and Kim Jenson (married filing a joint return) have $200,000 of taxable...

lIn Year 1, Jeff and Kim Jenson (married filing a joint return) have $200,000 of taxable income before considering the following transactions: a. On March 2, Year 1, they sold a painting (art) for $100,000 that was purchased 15 years ago for $90,000. b. A $12,000 loss on 11/1, Year 1 sale of bonds (acquired on 5/12, 5 years ago); c. A $4,000 gain on 12/12, Year 1 sale of IBM stock (acquired on 2/5, Year 1); d. A $17,000...

Problem 7-45 (LO. 7) Xinran, who is married and files a joint return, owns a grocery...

Problem 7-45 (LO. 7) Xinran, who is married and files a joint return, owns a grocery store. In 2018, his gross sales were $276,000, and his operating expenses were $320,000. Other items on his 2018 return were as follows: Nonbusiness capital gains (short-term) $20,000 Nonbusiness capital losses (long-term) 9,000 Itemized deductions 18,000 Ordinary nonbusiness income 8,000 Salary from part-time job 10,000 In 2019, Xinran provides the following information: Net business income $60,000 Salary (spouse) 25,000 Interest income 2,000 Adjusted gross...

Brad and Bessie have been happily married for 25 years. They have filed married filing joint...

Brad and Bessie have been happily married for 25 years. They have filed married filing joint every year of those 25 since they are happily married and consider themselves as one. They have two sons Bryan and Butch. Bryan is 19 years old and Butch is 14 years old. Bryan lived in his parents' home from January through August and he lived in his own apartment from September through December. During the year, Bryan attended college for one month before...

Subjects