Question

Campbell, a single taxpayer, has $95,000 of profits from her general store, which she operates as a sole proprietorship. She has no employees, $40,000 of qualified property, and $50,000 of taxable income before the deduction for qualified business income. How much is Campbell’s deduction for qualified business income?

Answer 1

Answer:

The $10,000 should be Campbell’s deduction for qualified business income.

Explanation:

For computing the deduction for qualified business income, there are two conditions to calculate the deduction which is described below:

Take Minimum amount of

1.  20% of profits from her general store

           OR

2. 20% of taxable income before the deduction for qualified business income

Where,

Profits is $95,000 and Taxable income is $50,000

Now, put these values on the above conditions

So,

Profits would be = $95,000 × 20% = $19,000

And, Taxable income is $50,000 × 20% = $10,000

The minimum amount is $10,000 So, the deduction should be allowed for only $10,000 ,not $19,000

Hence, the $10,000 should be Campbell’s deduction for qualified business income.