Question

Ben and Molly are married and will file jointly. Ben generates $300,000 of qualified business income from his single member LLC (a law firm). He reports his business as a sole proprietorship. Wages paid by the law firm amount to $40,000; the law firm has no significant property. Molly is employed as a tax manager by a local CPA firm. Their modified taxable income is $381,400 (this is also their taxable income before the deduction for q

Answer 1

Answer:

Explanation:

Ben and Molly are married and file tax returns jointly. Ben has a single member LLC that generates $300,000 business income and the firm pays wages of $40,000 using the base of $10,000. Because the business income generated is not clearly specified, a tentative QBI on the wages will be applied as W-2. Under such a case, the approved wages limit is 25% of the paid wages by the business plus a 2.5% of the adjusted basis property

The tentative QBI in Ben and Molly's case will be (25%*$40,000) + (2.5%*$10,000) = $10,250

Since the adjusted taxable income for the couple is $381,400, the tentative QBI deduction will be applied to reduce the taxable amount to $371,150.