Saskia is a 50% partner in a toy company.She is in the top tax bracket.The partnership has generated $2 million of qualified business income.The partnership paid W-2 wages of $880,000 and owns depreciable tangible property with an unadjusted basis of $1.2 million.What is Saskia's qualified business income deduction (ignoring self-employment taxes)?

Question

Quizplus · Accepted Answer

Saskia's share of the qualified business income is $1 million (50% of $2 million). The QBI deduction is the lesser of 20% of QBI ($200,000) or the greater of 50% of W-2 wages ($440,000) or 25% of W-2 wages plus 2.5% of the unadjusted basis of property ($220,000). Therefore, the deduction is $200,000.

Saskia Is a 50% Partner in a Toy Company