ExpertMedium1 markMultiple Choice
CPA · Question 60 · Area 4: Entity Tax Planning
A taxpayer operates a Specified Service Trade or Business (SSTB) - a consulting firm. They are single with taxable income of $300,000 in Year 1. The QBI threshold for single filers is $191,950 (Year 1 approx). What is their QBI deduction?
A taxpayer operates a Specified Service Trade or Business (SSTB) - a consulting firm. They are single with taxable income of $300,000 in Year 1. The QBI threshold for single filers is $191,950 (Year 1 approx). What is their QBI deduction?
Answer options:
A.
$0
B.
20% of QBI
C.
Limited by W-2 wages
D.
50% of W-2 wages
How to approach this question
1. Identify Business Type: SSTB.<br/>2. Identify Income Level: $300,000.<br/>3. Compare to Threshold: $191,950 (Phase-out range is $50k for single, ending ~$241,950).<br/>4. Status: Income exceeds the top of the phase-out range.<br/>5. Result: No QBI deduction allowed for SSTB high earners.
Full Answer
A.$0✓ Correct
A
Since the taxpayer's income ($300,000) exceeds the phase-out ceiling for single filers, and the business is an SSTB, the QBI deduction is $0.
Common mistakes
Applying wage limitations instead of the SSTB exclusion.
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