Question

The qualified business deduction is calculated and applied at the partner, not the partnership, level. True False

A partnership is an association formed by two or more taxpayers (which may be any type of entity) to carry on a trade or business.

True

False

Answer 1

Part 1 -

The statement is True.

Section 199A was introduced on Dec. 22, 2017 as a part of the Tax Cuts and Jobs Act and introduced the laws pertaining to Qualified Business Deductions (QBI). The act provides a deduction of up to 20% of income from a domestic trade or business operated as a sole proprietorship or through a partnership or S corporation, trust, or estate, for tax years beginning after Dec. 31, 2017, and ending before Jan. 1, 2026. The deduction is available in full to taxpayers with taxable incomes below $315,000 for joint returns and $157,500 for other taxpayers. The QIB is detemined at the partner level and the deduction has no effect on the adjusted basis of a partner's interest in the partnership or a shareholder's basis in S corporation stock.

Part 2 -

The statement is True

The IRS defines partnership in the Code § 761. As per this code, the term “partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a corporation or a trust or estate. Under regulations the Secretary may, at the election of all the members of an unincorporated organization, exclude such organization from the application of all or part of this subchapter, if it is availed of—

(1) for investment purposes only and not for the active conduct of a business,

(2) for the joint production, extraction, or use of property, but not for the purpose of selling services or property produced or extracted, or

(3) by dealers in securities for a short period for the purpose of underwriting, selling, or distributing a particular issue of securities,

if the income of the members of the organization may be adequately determined without the computation of partnership taxable income.

Thus, making the statement true.