Aaron is the sole shareholder and CEO of ABC, Inc., an S corporation that is a qualified trade or business. During the current year, ABC has net income of $325,000 after deducting Aaron's $100,000 salary. In addition to his compensation, ABC pays Aaron dividends of $250,000. What is Aaron's qualified business income?

Question

Quizplus · Accepted Answer

Qualified business income (QBI) for an S corporation is the net income of the business excluding reasonable compensation paid to the shareholder. Here, the net income is $325,000, and Aaron's salary of $100,000 is already deducted, so the QBI is $325,000. Dividends are not included in QBI.

Aaron Is the Sole Shareholder and CEO of ABC, Inc