Question

Katie is a shareholder in Engineers One, a civil engineering company. This year, Katie’s share of net business income from Engineers One is $170,000. Assume that Katie’s allocation of wages paid by Engineers One to its employees is $300,000 and her allocation of Engineers One’s qualified property is $150,000 (unadjusted basis of equipment, all purchased within past three years). Assume Katie has no other business income, no capital gains or qualified dividends, and that her taxable income before the deduction for qualified business income is $400,000. Calculate Katie’s deduction for qualified business income.

Katie is a shareholder in Engineers One, a civil engineering company. This year, Katie’s share of net business income from Engineers One is $170,000. Assume that Katie’s allocation of wages paid by Engineers One to its employees is $300,000 and her allocation of Engineers One’s qualified property is $150,000 (unadjusted basis of equipment, all purchased within past three years). Assume Katie has no other business income, no capital gains or qualified dividends, and that her taxable income before the deduction for qualified business income is $140,000. Calculate Katie’s deduction for qualified business income.

Answer 1

Answer
	Explanation :
a)	Katie Qualified businesses have 20 % of income
	$170,000 * 20% = $34,000
	50% of her shares in business wages
	$300,000 * 50% = $150,000
	25 percent of allocable wages
	$300,000 * 25% = $75,000
	sum of 2.5 % of her allocable share
	$150,000 * 2.5% = $3,750
	Qualified businesses have 20 % of income
	$180,000 x 20% = $36,000
	He has less than 20 % of his taxpayered income before deductions
	$400,000 x 20% = $80,000
b)	Qualified businesses have 20 % of income
	$170,000 * 20% = $34,000
	50% of her shares in business wages
	$300,000 * 50% = $150,000
	25 percent of allocable wages
	$300,000 * 25% = $75,000
	sum of 2.5 % of her allocable share
	$150,000 * 2.5% = $3,750
	Qualified businesses have 20 % of income
	$170,000 * 20% = $34,000
	He has less than 20 %
	$140,000 * 20% = $28,000