Rob Wriggle operates a small plumbing supplies business as a sole proprietor. In 2019, the plumbing business has gross business income of $421,000 and business expenses of $267,000, including wages paid of $58,000. The business sold some land that had been held for investment generating a long-term capital gain of $15,000. The business has $300,000 of qualified business property in 2019. Rob's wife, Marie, has wage income of $250,000. They jointly sold stocks in 2019 and generated a long-term capital gain of $13,000. Rob and Marie have no dependents and in 2019, they take the standard deduction of $24,400. The income threshold for QBI limitations starts at $321,400 for married filing jointly taxpayers. a. What is Rob and Marie's taxable income before the QBI deduction? $407,600 b. What is Rob and Marie's QBI? $154,000 c. What is Rob and Marie's QBI deduction? $29,248 complete Form 8995-A to report Rob’s QBI deduction. 2 Qualified business income from the trade, business, or aggregation. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 154000 3 Multiply line 2 by 20% (0.20). If your taxable income is $160,700 or less ($160,725 if married filing separately; $321,400 if married filing jointly), skip lines 4 through 12 and enter the amount from line 3 on line 13 . . . . 3 30800 4 Allocable share of W-2 wages from the trade, business, or aggregation . . . 4 58000 5 Multiply line 4 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 29000 6 Multiply line 4 by 25% (0.25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 14500 7 Allocable share of the unadjusted basis immediately after acquisition (UBIA) of all qualified property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 300000 8 Multiply line 7 by 2.5% (0.025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7500 9 Add lines 6 and 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 22000 10 Enter the greater of line 5 or line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 29000 11 W-2 wage and qualified property limitation. Enter the smaller of line 3 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 29000 12 Phased-in reduction. Enter amount from line 26, if any. See instructions 12 13 Qualified business income deduction before patron reduction. Enter the greater of line 11 or line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 Patron reduction. Enter the amount from Schedule D (Form 8995-A), line 6, if any . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Qualified business income component. Subtract line 14 from line 13 15 16 Total qualified business income component. Add all amounts reported on line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .► 16 17 Enter amounts from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 30800 18 Enter the amounts from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 29000 19 Subtract line 18 from line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1800 20 Taxable income before qualified business income deduction . . . . . . . . . . . . . . . . . . 20 21 Threshold. Enter $160,700 ($160,725 if married filing separately; $321,400 if married filing jointly) . . . . . . . . . . . . . . . 21 321400 22 Subtract line 21 from line 20 . . . . . . . . . . 22 23 Phase-in range. Enter $50,000 ($100,000 if married filing jointly) . . . . . . . . . . . . . 23 100000 24 Phase-in percentage. Divide line 22 by line 23 . . . . . . . . . . . . . . . . . . . . . . . . 24 25 Total phase-in reduction. Multiply line 19 by line 24 . . . . . . . . . . . . 25 26 Qualified business income after phase-in reduction. Subtract line 25 from line 17. Enter this amount here and on line 12, for the corresponding trade or business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Rob Wriggle operates a small plumbing supplies business as a sole proprietor. In 2019, the plumbing business has gross business income of $421,000 and business expenses of $267,000, including wages paid of $58,000. The business sold some land that had been held for investment generating a long-term capital gain of $15,000. The business has $300,000 of qualified business property in 2019. Rob's wife, Marie, has wage income of $250,000. They jointly sold stocks in 2019 and generated a long-term capital gain of $13,000. Rob and Marie have no dependents and in 2019, they take the standard deduction of $24,400. The income threshold for QBI limitations starts at $321,400 for married filing jointly taxpayers. a. What is Rob and Marie's taxable income before the QBI deduction? $407,600 b. What is Rob and Marie's QBI? $154,000 c. What is Rob and Marie's QBI deduction? $29,248 complete Form 8995-A to report Rob’s QBI deduction. 2 Qualified business income from the trade, business, or aggregation. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 154000 3 Multiply line 2 by 20% (0.20). If your taxable income is $160,700 or less ($160,725 if married filing separately; $321,400 if married filing jointly), skip lines 4 through 12 and enter the amount from line 3 on line 13 . . . . 3 30800 4 Allocable share of W-2 wages from the trade, business, or aggregation . . . 4 58000 5 Multiply line 4 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 29000 6 Multiply line 4 by 25% (0.25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 14500 7 Allocable share of the unadjusted basis immediately after acquisition (UBIA) of all qualified property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 300000 8 Multiply line 7 by 2.5% (0.025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7500 9 Add lines 6 and 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 22000 10 Enter the greater of line 5 or line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 29000 11 W-2 wage and qualified property limitation. Enter the smaller of line 3 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 29000 12 Phased-in reduction. Enter amount from line 26, if any. See instructions 12 13 Qualified business income deduction before patron reduction. Enter the greater of line 11 or line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 Patron reduction. Enter the amount from Schedule D (Form 8995-A), line 6, if any . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Qualified business income component. Subtract line 14 from line 13 15 16 Total qualified business income component. Add all amounts reported on line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .► 16 17 Enter amounts from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 30800 18 Enter the amounts from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 29000 19 Subtract line 18 from line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1800 20 Taxable income before qualified business income deduction . . . . . . . . . . . . . . . . . . 20 21 Threshold. Enter $160,700 ($160,725 if married filing separately; $321,400 if married filing jointly) . . . . . . . . . . . . . . . 21 321400 22 Subtract line 21 from line 20 . . . . . . . . . . 22 23 Phase-in range. Enter $50,000 ($100,000 if married filing jointly) . . . . . . . . . . . . . 23 100000 24 Phase-in percentage. Divide line 22 by line 23 . . . . . . . . . . . . . . . . . . . . . . . . 24 25 Total phase-in reduction. Multiply line 19 by line 24 . . . . . . . . . . . . 25 26 Qualified business income after phase-in reduction. Subtract line 25 from line 17. Enter this amount here and on line 12, for the corresponding trade or business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The income threshold for QBI limitations starts at $321,400 for married filing jointly taxpayers.

a. What is Rob and Marie's taxable income before the QBI deduction?
$407,600

b. What is Rob and Marie's QBI?
$154,000

c. What is Rob and Marie's QBI deduction?
$29,248

complete Form 8995-A to report Rob’s QBI deduction.

2	Qualified business income from the trade, business, or aggregation. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2	154000
3	Multiply line 2 by 20% (0.20). If your taxable income is $160,700 or less ($160,725 if married filing separately; $321,400 if married filing jointly), skip lines 4 through 12 and enter the amount from line 3 on line 13 . . . .	3	30800
4	Allocable share of W-2 wages from the trade, business, or aggregation . . .	4	58000
5	Multiply line 4 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5	29000
6	Multiply line 4 by 25% (0.25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6	14500
7	Allocable share of the unadjusted basis immediately after acquisition (UBIA) of all qualified property . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7	300000
8	Multiply line 7 by 2.5% (0.025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8	7500
9	Add lines 6 and 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9	22000
10	Enter the greater of line 5 or line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . .	10	29000
11	W-2 wage and qualified property limitation. Enter the smaller of line 3 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11	29000
12	Phased-in reduction. Enter amount from line 26, if any. See instructions	12
13	Qualified business income deduction before patron reduction. Enter the greater of line 11 or line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
14	Patron reduction. Enter the amount from Schedule D (Form 8995-A), line 6, if any . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
15	Qualified business income component. Subtract line 14 from line 13	15
16	Total qualified business income component. Add all amounts reported on line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .►	16

17	Enter amounts from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17	30800
18	Enter the amounts from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18	29000
19	Subtract line 18 from line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19	1800
20	Taxable income before qualified business income deduction . . . . . . . . . . . . . . . . . .	20
21	Threshold. Enter $160,700 ($160,725 if married filing separately; $321,400 if married filing jointly) . . . . . . . . . . . . . . .	21	321400
22	Subtract line 21 from line 20 . . . . . . . . . .	22
23	Phase-in range. Enter $50,000 ($100,000 if married filing jointly) . . . . . . . . . . . . .	23	100000
24	Phase-in percentage. Divide line 22 by line 23 . . . . . . . . . . . . . . . . . . . . . . . .	24
25	Total phase-in reduction. Multiply line 19 by line 24 . . . . . . . . . . . .	25
26	Qualified business income after phase-in reduction. Subtract line 25 from line 17. Enter this amount here and on line 12, for the corresponding trade or business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26

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