New Partnership Activity Aggregation Rules: Unpacking the "Specified Service Trade or Business" Definition

W2 Wage and Income Tests, Avoiding "Pack and Crack" Disallowances, and Claiming the 20% QBI Deduction

Note: CLE credit is not offered on this program

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

Conducted on Wednesday, February 6, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax advisers to partnership entities with an in-depth and practical guide to the rules governing permissible activity aggregation among multiple pass-through entities (PTEs) for purposes of calculating the 20% pass-through deduction. The panel will go beyond the basics to detail the Service's position on specified service trades or businesses (SSTBs) excluded from qualified business income (QBI) treatment, describe the differences between the Service's recent guidance and activity grouping rules found elsewhere in the Code, and discuss aggregation strategies to maximize the deduction.


The QBI deduction regime continues to challenge tax advisers to pass-through entities, particularly in the area of determining what separate business lines to aggregate for purposes of determining whether a PTE has sufficient income and W2 wages to claim the pass-through deduction. While the Service issued proposed regulations in August 2018 outlining its position on specified service trades or businesses (SSTBs) and the standards for aggregating activities that would receive QBI treatment, significant areas of complexity remain.

The proposed regulations go into detail about what constitutes an SSTB ineligible to claim the deduction. While the regs are generally taxpayer-friendly, Treasury introduced some measure of uncertainty in applying a "principal asset" test for determining whether the primary business asset is the reputation or skill of the principal or key employees.

The regulations also go into significant detail on permissible aggregation of activities for purposes of meeting the W2 wage test. Critical to determining whether a partnership with multiple business lines may combine those activities is an understanding of the anti-abuse rules restricting the use of "crack and pack" structures in an attempt to avoid SSTB restrictions.

Listen as our expert panel goes beyond the basics to offer practical guidance on the Section 199A aggregation rules for QBI calculations and eligibility as well as designing aggregation strategies to maximize pass-through deductions.



  1. Section 199A deduction defined
  2. Clarifications on SSTBs
    1. Cross-references to Section 1202 capital gains exclusion rules
    2. Differences between SSTB definitions and other IRS provisions regarding service businesses
    3. Principal asset test
    4. De minimis tests and threshold amounts
    5. Anti-Abuse Provisions
  3. Aggregation rules
  4. Benefits of Aggregating trades and businesses
  5. Computation and treatment of deductions
  6. W2 wage calculation rules
    1. Notice 2018-64 permissible methods
    2. Definition of W2 wages for QBI calculations and limits
    3. Allocating W2 wages to PTE owners
    4. Impact of reasonable compensation requirements on QBI deduction calculations
  7. Special consideration for real estate pass-through entities


The panel will discuss these and other important questions:

  • How the proposed regs' definitions of SSTBs differ from other provisions in the Internal Revenue Code regarding service-related businesses
  • The IRS position expressed in the proposed regulations on the application of the "principal asset" test in determining whether a business line is an SSTB ineligible to claim the 20% pass-through deduction
  • The details of what is included in the W2 wage and income test for purposes of QBI eligibility
  • Benefits to taxpayers of aggregating multiple trades and businesses


Ashraf, Saba
Saba Ashraf

Ballard Spahr

Ms. Ashraf is a Practice Leader at her firm's Tax Group. She advises clients worldwide on corporate and partnership...  |  Read More

Barnett, Robert
Robert S. Barnett

Capell Barnett Matalon & Schoenfeld

Mr. Barnett’s practice is highly concentrated in the areas of taxation, trusts, estates, corporate and...  |  Read More

Goode, Michael
Michael S. Goode

Special Counsel
Lewis Thomason

Mr. Goode focuses his practice on the tax, business and estate planning needs of families and businesses. On an...  |  Read More

Mandarino, Joseph
Joseph C. Mandarino

Smith Gambrell & Russell

Mr. Mandarino's practice focuses on corporate, tax and finance law. He is involved with a wide variety of...  |  Read More

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