Section 199A Qualified Business Income (Half-Day Program) (Completed)

Significant Planning Opportunities to Maximize Deduction
Effective for the 2018 tax year Section 199A allows a 20% deduction for “qualified business income.” This deduction applies to any business income earned outside a C corporation, so it will affect schedule C filers, and income earned in a partnership or an S corporation.

The mechanics of the deduction are not that difficult, but the deduction either phases out or may be limited is taxable income exceeds a threshold amount. For non-service businesses the deduction may be limited based on the W-2 wages paid from the business or a combination of W-2 wages and unadjusted basis of property used in the business. For service businesses the deduction can be lost when income reaches the end of the phase-out range. There is a two-step limitation applied to service businesses – first, an applicable percentage is applied to parameters in computing the deduction, then the “regular” threshold income limitation is applied.

It may not be clear whether a business is a service business. It may also be possible to plan to maximize the deduction when the taxpayer is otherwise in the phase-out range or is subject to a general taxable income limitation. Increasing taxable income, deductions, W-2 wages, or capital can have unexpected consequences when the QBID interaction is considered.

How will a business be defined? Will the passive activity “activity” definitions be used to define how many businesses the taxpayer has? What special issues will arise when the business is operated through a pass through entity? Can changing a S corporation shareholder’s wages allow for a larger deduction? How do partnership allocation provisions interact with the threshold income limitations?

This session is an expansion of a 2-hour program that has received outstanding reviews. Participants asked for many more examples, and the 4-hour format of this course allows for many numerical illustrations of the QBID. It also allows for a detailed discussion of the many unanswered questions surrounding this significant new deduction. This session will discuss those issues, and many others, to allow you to properly advise clients.

Thank You Gift
As our “thank you for attending” gift, firms registered for this webinar will receive a complimentary issue of Wolter Kluwer’s Journal of Passthrough Entities in electronic format.

Who Should Attend
CPAs, EAs, tax preparers and other tax professionals with responsibility for advising clients with business income on their tax returns.

Topics Covered

• Computation of the Section 199A deduction
• Limits based on taxable income of the qualified business
• Limits based on the taxpayer's taxable income
• Phase-out computations for a service business
• Wage or wage/capital limitations on non-service businesses
• Planning to control taxable income, wages, and capital to maximize the deduction
• Impact of Section 199A on purchase price allocations
• How to determine unadjusted basis of business assets
• What is a service business?
• How broad (or narrow) is a business defined?
• What is business income?
• Reporting issues for flow-through entities

Learning Objectives

• Compute the Section 199A deduction for taxpayers above the threshold income level and for other taxpayers
• Identify planning opportunities to maximize the deduction
• Define a service business as that term is used in Section 199A

Level
Intermediate

Instructional Method
Group: Internet-based

NASBA Field of Study
Taxes (4 hours)

Program Prerequisites
Basic knowledge of passthrough entity taxation concepts.

Advance Preparation
None