Katie is a shareholder in Engineers One, a civil engineering company. This year,

Question

Katie is a shareholder in Engineers One, a civil engineering company. This year, Katie's share of the net business income from Engineers. One is $200,000. Assume that Katie's allocation of wages paid by Engineers One to it's employees is $300,000 and her allocation of Engineers One's qualified property is $150,000 (unadjusted basis of equipment , all purchased within the 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.

Required:

a. Calculate Katie's deductions for qualified business income.

b. Assume the same facts as earlier, except Katie's net business income from Engineers One is $400,000 and taxable income before the deductable for qualified business income is $350,000.

Explanation / Answer

Ans:

A) Deduction is 20% of qualified business income is $400000 is Restricted to

1) 50% of share in wages with respect to qbi

2)25% share of wages+2.5 percent of the unadjusted basis of qualified property

Than 400000*20%=80000 but Restricted to

1)50% of 300000

2)25%of 300000+2.5%of150000

that is 150000 or 75000+3750 tat is 78750 hence the allowed deduction is 78750

B.) the deduction is 350000*20%=70000

1)50% of 300000

2)25%of 300000+2.5%of150000

that is 150000 or 75000+3750 thatis 78750

than least amount between 78750 and 70000 is 70000 hence deduction is 70000 in this case.

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