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?

Question

Zechariah Burke

Business

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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Answers (1)

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Isabela Osborne · Answer 1

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.