Calculating IRC 199A Qualified Pass-Through Business Income Deduction

Determining QBI, Eligible Entities, Phase-Ins, Carry-Forwards, Wage and Capital Limitations

Recording of a 110-minute CPE webinar with Q&A


Conducted on Monday, June 29, 2020

Recorded event now available

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Program Materials

This webinar will guide partnership tax advisers and compliance professionals in calculating the Section 199A Deduction of Qualified Business Income of Pass-Through Entities, which is central to the tax overhaul/reform legislation. The panel will detail activities eligible for the deduction, describe those excluded from the deduction, offer practical approaches for calculating the deduction, and outline planning tools for pass-through entities (PTEs) to restructure business activities to qualify.

Description

The deduction for qualified business income of PTEs enacted under Section 199A is among tax reform's most complex components. For tax advisers serving partnerships, trusts, and other PTEs, tax reform creates significant opportunities and challenges.

The law provides for a deduction equal to 20% of the taxpayer's qualified business income from PTEs, 20% of qualified REIT dividends, qualified publicly traded partnership income, and qualified cooperative dividends. However, Section 199A contains significant limitations on pass-through income that is deductible. For example, most professional service partnerships such as attorneys and accountants cannot claim the deduction for their partnership service income.

Calculating the Section 199A deduction sets up significant challenges for tax preparers and advisers. The deduction is subject to wage and capital limitations, with a phase-in of those limits. Advisers must navigate the rules governing carryforward losses against the allowable QBI deduction. Understanding the mechanics involved in calculating the Section 199A deduction is critical to avoid adverse tax consequences due to missed deduction opportunities.

Listen as our experienced panel provides a thorough and practical guide to calculating the Section 199A Deduction of Qualified Business Income Deduction of Pass-Through Entities in the recent tax law.

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Outline

  1. Section 199A deduction defined
  2. Qualified business income
  3. Real estate safe harbor
  4. Eligible pass-through entities
  5. Aggregation
  6. Wages and capital limitations
  7. Treatment of carryforward losses
  8. Calculating the deduction
  9. Planning opportunities

Benefits

The panel will discuss these and other important questions:

  • Identifying pass-through activities and revenues that are not "qualified business income" eligible for the Section 199A deduction
  • How wage and capital limitations impact Section 199A deduction calculations
  • Handling loss carryforwards in calculating current and future year deduction
  • Incorporating Section 199A deduction calculations into tax projections to determine if a business should restructure for tax purposes
  • Calculating the 20% QBI deduction for separate lines of business

Faculty

Longman, Robb
Robb A. Longman

Managing Member
Longman & Van Grack

Mr. Longman represents his clients in business matters, tax planning and litigation, as well as estate planning. He...  |  Read More

Palovick, Sara
Sara A. Palovick, CPA

Tax Senior Manager
Withum Smith+Brown

Ms. Palovick specializates in real estate, and focuses most of her time in the areas of partnership and individual...  |  Read More

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