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19 September, 07:20

Elliot and Conrad (a two-member LLC) operated a consulting firm (a "specified services" business). The business is equally owned and the two are not related. The business generates net income of $280,000, pays W-2 wages of $170,000, and has qualified business property of $140,000. Elliot's wife, Julie, is an attorney who works for a local law firm and receives wages of $90,000. They will file a joint tax return and use the standard deduction of $24,000. Conrad's wife, Jessica, earned wages during the year of $350,000, and Conrad and Jessica have itemized deductions of $62,000 and will file a joint return.

a. What is Elliot's qualified business income deduction?

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  1. 19 September, 07:40
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    Elliot's qualified business income deduction is $28,000.

    Explanation:

    total income

    = share in specified service business income + wages of wife

    = 280000*50% + $90000

    = $230,000

    taxable income before QBI = total income - standard deduction

    = $230,000 - $24,000

    = $206,000

    QBI deduction is lesser of:

    - 20% of qualified business income

    = $140,000*20%

    = $28,000

    Therefore, Elliot's qualified business income deduction is $28,000.
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