Question

1. Katie is a shareholder in Engineers One, a civil engineering company. This year, Katie’s share of net business income from Engineers One is $180,000. 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.

2. Katie is a shareholder in Engineers One, a civil engineering company. This year, Katie’s share of net business income from Engineers One is $180,000. 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 $160,000. Calculate Katie’s deduction for qualified business income.

Answer 1

ANS,

(A)

Katie is not limited by the labour-base limit because herQualified businesses have 20 percent of income

($180,000 x 20% = $36,000)

More than 50% of his income is less than 50%

$300,000 x 50% = $150,000

25 percent of her allocable wages

$300,000 x 25% = $75,000

Also 2.5 per cent of unfair base of qualified property

$150,000 x 2.5% = $3,750

Similarly, not limited to the kattie Income Threshold because its worthy business is 20 percent 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)

Katie is not limited by the labour-base limit because herQualified businesses have 20 percent of income

$180,000 x 20% = $36,000

is less than the greater of

50 percent of her allocable wages

$300,000 x 50% = $150,000

25 percent of her allocable wages

$300,000 x 25% = $75,000

Also 2.5 per cent of unfair base of qualified property

$150,000 x 2.5% = $3,750

Similarly, not limited to the kattie Income Threshold because its worthy business is 20 percent of income

$180,000 x 20% = $36,000

He has less than 20 % of his taxpayered income before deductions

$160,000 x 20% = $32,000

.

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