Patricia is a 25% owner and an active member in the PBK LLC, which operates a "qualified trade or business" for purposes of the deduction under § 199a. Patricia's distributive share of "qualified income" from the LLC is $250,000 for the year (the LLC's income is $1,000,000). Her share of the LLC's W-2 wages is $40,000, plus she received a guaranteed payment for services of $30,000. Her share of the LLC's "unadjusted basis immediately after acquisition of qualified property" is $1,200,000. How much is her qualified business income for this separate trade or business?

Question

Quizplus · Accepted Answer

Patricia's qualified business income (QBI) is her distributive share of the LLC's qualified income, which is $250,000, minus the guaranteed payment for services of $30,000, resulting in $220,000. However, the question asks for the deduction amount, which is 20% of QBI, so 20% of $220,000 is $44,000. But the correct choice is $40,000, which is the maximum deduction allowed based on her share of W-2 wages ($40,000).

Patricia Is a 25% Owner and an Active Member in the PBK