Passthrough Business Deduction - Section 199A Selected Overview - Mini Course (Course Id 2367)

Taxes - Taxes for Course Id 2367

The Tax Cuts and Jobs Act (P.L. 115-97), enacted Dec. 22, 2017, created, under §199A, a new deduction for up to 20% of qualified business income (QBI) from partnerships, limited liability companies (LLCs), S corporations, trusts, estates, and sole proprietorships for tax years beginning after Dec. 31, 2017. However, determining the §199A deduction amount and availability is a very complex multi-step process that may phase out some or all of the deduction. 
In the face of this complexity, the text provides a selected overview of the basic components of this below-the-line deduction. Qualified business income, taxpayer's taxable income, wage/capital limit, specified services trade or businesses, and other key components are not only defined and calculated but their interaction is demonstrated and exampled.  

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 2367

As a result of studying the assigned materials, you should be able to meet the objectives listed below.

At the start of the materials, participants should identify the following topics for study:
* Deduction amount
* Wage/capital limit
* Qualified business income
* Qualified trade or business
* Specify service trade or business
* De minimis regulatory rule
* Domestic business

After reading the materials, participants will be able to:
1. Recognize §199A's limited effective time period, its complex calculation process and the general exclusions, limits, and restrictions applicable to the provision.
2. Determine the §199A deduction amount, the type of W-2 wages used in calculating the wage/capital limit and specify how the limit impacts the amount and availability of the deduction.
3. Identify qualified business income and loss, its basic components and the ability of a taxpayer to aggregate businesses in its determination.
4. Recognize the specified services trade or business exclusion, the listed excluded services and the important exceptions provided by the regulatory de minimis rule. Identify a domestic trade or business.

Chapter 1 - Pass-through Business Deduction

Section 199A

Overview

Two Deductions

Passthrough Entities Deduction - 199A(a)

Definition

Agricultural & Horticultural Cooperatives Deduction - §199A(g)

Specified Cooperative Definition

Exclusions, Limits, & Restrictions

Specified Service Trade or Business Exclusion

Wage/Capital Limit

Overall Ceiling Limit - The Final Frontier

Restrictions & Special Rules

Deduction Amount - §199A(a)

Overall Ceiling Limit

Combined Qualified Business Income Amount - §199A(b)

Deductible Amount Under §199A(b)(2)

Wage/Capital Limit

Income Equal to or Less Than Threshold - §§199A(b)(3)(A)

Income Above Threshold but Below Addition - §199A(b)(3)(B)

Income Above Threshold Plus Addition - §199A(b)(2)

W-2 Wages

Qualified Property

Qualified Business Income (QBI) - §199A(c)(1)

Carryover of Losses for Negative Total QBI - §199A(c)(2)

Qualified Items of Income, Gain, Deduction, & Loss - §199A(c)(3)

Exclusions from Qualified Items - §199A(c)(3)(B)

Reasonable Compensation & Guaranteed Payments - §199A(c)(4)

REIT Dividends &  Publicly Traded Partnership Income

Qualified Trade or Business - §199A(d)

Definition of Trade or Business - §1.199A-1(b)(14)

Rental Real Estate Activities as a Trade or Business

Safe Harbor

Notice 2019-07

Revenue Procedure 2019-38

Aggregation - Grouping Multiple Activities

Specified Service Trade or  Business Exclusion from Definition

Application of the Exclusion - Three Results

Below the Threshold Amount

Calculation Review

In Excess of  the Threshold Amount Plus $50,000 or $100,000

Within the Phase-in Range

Phase-in Range

Applicable Percentage - §199A(d)(3)(B)

De Minimis Exclusion for Small Amounts of Specified Service

Agricultural & Horticultural Cooperatives - §199A(g)

Cooperative Definition

Domestic Business - 199A(c)(3)(A)(i)

Glossary