Asset Acquisition Rules for Section 199A: Avoiding QBI Limitations by Increasing UBIA

Description

199A provided a generous 20% deduction for eligible taxpayers and new ponderings for tax professionals and business owners. The deductible amount is the lesser of 20% of QBI or the greater of 50% of wages or 25% of wages plus 2.5% of the UBIA. First, advisers must determine which taxpayers can benefit from a review of UBIA assets. Once identified, it follows that maximizing UBIA can increase the 20% deduction and that astute tax professionals have devised steps to do just this.

Generally speaking, UBIA is a property's original basis, without regard to depreciation. There are, however, more considerations than the price paid. The asset must be held and available for use in the trade or business at the close of the taxable year and must not be beyond the depreciable period for UBIA. Understanding what qualifies as UBIA is key to calculating the 20% deduction for applicable taxpayers.

For taxpayers identified as benefiting from the UBIA calculation, the calculation of the wage limitation is still applicable. Knowing what to include and maximizing the 25% of compensation along with UBIA optimizes the 20% QBI deduction for these taxpayers.

Listen as our panel of experts explains property eligible for the UBIA calculation, including determining UBIA, determining UBIA for Section 1031 exchanges, step-ups, and involuntary conversions, and steps to maximize UBIA for qualifying taxpayers.