Answer:
A. $8,000
B. $14,400
Explanation:
A. Calculation to determine their tentative QBI based on the W-2 Wages/Capital Investment Limit
First step is to calculate the Applicable Percentage
Applicable percentage= 100%-($386,600 - $326,600)/100,000
Applicable percentage=40%
Now let Calculate the tentative QBI based on the W-2 Wages/Capital Investment Limit
GREATER OF BELOW:
Tentative QBI based on the W-2 Wages/Capital Investment Limit=50% of W-2 wages ($40,000 × 50% × 40%)
Tentative QBI based on the W-2 Wages/Capital Investment Limit=$8,000
OR
Tentative QBI based on the W-2 Wages/Capital Investment Limit=[ W-2 wages of ($40,000 × 25% × 40%)]+ [Unadjusted basis of qualified property of ($0 × 2.5% × 40%)]
Tentative QBI based on the W-2 Wages/Capital Investment Limit=$4,000+$0
Tentative QBI based on the W-2 Wages/Capital Investment Limit=$4,000
Therefore their tentative QBI based on the W-2 Wages/Capital Investment Limit will be $8,000
2. Calculation to Determine their allowable QBI deduction for 2020
First step is to calculate the General QBI deduction
General QBI deduction [($300,000 × 20%)× 40%]
General QBI deduction=$24,000
Second step is to calculate the Reduction Ratio
Reduction ratio= ($386,600 - $326,600)/100,000
Reduction ratio=$60,000/100,000
Reduction ratio= 60%
Now let calculate the allowable QBI deduction for 2020
General QBI deduction $24,000
Less Reduction of W-2 Wages/Capital Investment Limit ($9,600)
[($24,000-$8,000)*60%]
2020 Allowable QBI deduction $14,400
($24,000-$9,600)
Therefore their allowable QBI deduction for 2020 will be $14,400
