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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

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

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Conducted on Wednesday, January 29, 2020

Recorded event now available

or call 1-800-926-7926

This course will provide tax advisers to pass-through 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% deduction for Qualified Business Income. 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 aggregation rules under 199A and the grouping rules under Section 469, and discuss aggregation strategies to maximize the deduction.


The QBI deduction regime continues to challenge tax advisers to PTEs, particularly in the area of determining eligibility to aggregate for purposes of maximizing Qualified income, UBIA and W2 wages to claim the pass-through deduction.

The final regulations issued January 2019 include the ability to aggregate multiple QTBs provided the requirements outlined in these regulations are met. The election once made is irrevocable. The regulations use 267(b) and 707(b) attribution rules to determine ownership and allow the aggregation election to be made at the entity level. Determining whether there is adequate ownership by non-majority pass-through entity owners is complex and requires additional informational reporting.

In addition to the final regulations, Revenue Procedure 2019-38 issued September 2019 provides a safe harbor that allows certain real estate enterprises to qualify as a trade or business. Real estate ventures not meeting the safe harbor could still be a QTB using existing facts and circumstances.

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. Real estate safe harbor


The panel will discuss these and other essential questions:

  • How the proposed regs' definitions of SSTBs differ from other provisions in the 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 to include in the W2 wage and income test for purposes of QBI eligibility
  • Benefits to taxpayers of aggregating multiple trades and businesses


Barnett, Robert
Robert S. Barnett, JD, MS (Taxation), CPA

Capell Barnett Matalon & Schoenfeld

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

Mandarino, Joseph
Joseph C. Mandarino

Smith Gambrell & Russell

Mandarino is a Partner in the Tax Practice of Smith, Gambrell & Russell, LLP.  His practice focuses on...  |  Read More

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