Question

Part1

Margen is single and has taxable income before the QBI deduction of $173,300. Margen owns a sole proprietorship (not a professional service) that produced net ordinary income of $180,000 and subject to self-employment tax of $21,300. The business paid total W-2 wages of $74,000 and the total unadjusted basis of prop­erty held by the business is $120,000. How much is Margen’s QBI deduction?

Part2

a. Mourezky gave some long-term real estate to a church. The property was worth $33,000 and had a basis of $10,000.   Mourezky’s adjusted gross income was $60,000 and Mourezky made cash contributions of $9,000. How much is Mourezky’s charitable deduction?

b. Casey made several contributions to Casey’s alma mater during the current year as follows:

Cash                                                                                                        $ 4,200

A painting that Casey has owned five years for display

in the library (basis, $1,280), FMV                                                9,500

Stock held for 10 months as an investment (basis, $900), FMV                                                                                                                       1,200

Assuming Casey’s AGI is $30,000, how much is Casey’s charitable contribution deduction?

Part3

Josephine is single and paid the following taxes during 2020:

State income taxes withheld from wages                                 $ 4,375

Refund of 2019 state income taxes                                                     - 45

State and local sales taxes paid                                                         3,125

State and local real property taxes paid                                        5,275

State auto registration ($375 was based on the value)               525

How much is Josephine’s federal deduction for state and local taxes?

Answer 1

Part 1 answer

Margen is filing singlly

Calculation of QIB on the basis of taxable Income if taxable Income Exceeds $ 157500, the following are the calculation.

In this case Taxable Income Exceeds $ 157500

Ist Method : 50% of Companies W-2 Wages = 50% * $ 74000 = $ 37000

IInd Method : 25% of W-2 wages Plus 2.5% of unadjusted basis of all qualified properties

=  25% * 74000+ 2.5% * $ 120000

= $ 18500+ $3000 =$ 21500

Margen can choose greater deduction of QIB that is = $ 37000

Part B answer

a. Mourezky's charitable deduction would be:-

cash= $9000( in 2020 an individual gets 100%ofAGI deduction on cash contribution if done to qualified institution and church is an qualified institution

property- Fmv=$33000 ( only 50% of AGI can be claimed in case of donation of property, so( .50*60000)can be claimed

Total of Mourezky's deduction = $9000+30000=$39000

b. Casey's deduction=

cash=$4200(in 2020 an individual gets 100%ofAGI deduction on cash contribution if done to qualified institution and educational instution is an qualified institution

painting=$9500( if it is displayed at charity then Fmv is the amount of deduction but it will be limited to 50% of AGI= 15000

stock=$900( as stock is short term only cost is allowed as deduction

both stock and painting is less than 15000(50% of AGI

Total Casey charitable contribution deduction=$ 4200+9500+900=$14600

Answer part C

State Income taxes 4375

Sales Tax 3125

Property Tax 5275

Auto Registration 525

Total State and Local taxes 13300