The Tax Cuts and Jobs Act of 2017 (TCJA), signed into law during the closing days of 2017, affects the tax planning and income tax liability for many taxpayers. Among those for whom the TCJA will have a more significant effect are business owners of pass-through trades or businesses who may be eligible for the TCJA's pass-through deduction. This course will examine the pass-through deduction authorized under Section 199A of the TCJA.
The text is conceptually divided into three sections: First, calculation of the pass-through deduction for business owners whose taxable income does not exceed a threshold amount set by statute; second, calculation of the pass-through deduction for business owners whose taxable income is greater than the threshold; and finally, calculation of the pass-through deduction for business owners whose taxable income is greater than the threshold and whose businesses are considered specified service trades or businesses (SSTBs). The final chapter examines each of the business categories that are considered specified service trades or businesses and identifies those businesses that might appear to be placed in those categories but which would not be deemed SSTBs.
In examining the pass-through deduction it:
• Provides an explanation of computation of the deduction and appropriate examples;
• Considers how W-2 wages and the unadjusted basis of qualified property immediately after its acquisition (UBIA) should be determined;
• Defines qualified business income (QBI), qualified REIT dividends and qualified publicly traded partnership (PTP) income and the special rules applicable to them;
• Examines the aggregation rules applicable to the deduction;
• Identifies trades or businesses considered specified service trades or businesses (SSTB) and the trade or business of performing services as an employee excluded from pass-through deduction eligibility; and
• Discusses the special rules applicable to computing the pass through deduction for relevant pass-through entities (RPEs), publicly traded partnerships (PTPs), trusts and estates.
Learning Objectives
After completing this section of the course, you will be able to:
• Explain how to compute the Section 199A deduction for pass-through business owners whose taxable income is:
• Not in excess of the applicable threshold;
• In excess of the applicable threshold but not in excess of the sum of the threshold and phase-in range;
• In excess of the sum of the applicable threshold and phase-in range;
• Determine W-2 wages and the unadjusted basis of qualified property immediately after its acquisition (UBIA);
• Define qualified business income (QBI), qualified REIT dividends and qualified publicly traded partnership (PTP) income and the special rules applicable to them;
• Recognize the aggregation rules applicable to the Section 199A deduction;
• Identify the trades or businesses considered specified service trades or businesses (SSTBs) that may be ineligible for the pass-through deduction;
• Identify the applicable threshold amounts;
• Recognize the requirement that would enable an SSTB to qualify for an exception to disqualification for the pass-through deduction;
• Calculate qualified business income of SSTBs and non-SSTBs for business owners whose taxable income exceeds the applicable threshold;
• Recognize the methods that may be used to determine W-2 wages for purposes of the pass-through deduction;
• Define "qualified property" as used in connection with the pass-through deduction;
• Determine when the general rule for calculating QBI is modified for Section 199A deduction purposes;
• Apply the pass-through deduction rules to calculate the reduction percentage and the applicable percentage for purposes of the Section 199A deduction;
• Calculate the Section 199A deduction for a pass-through business other than an SSTB whose owner's taxable income is within the phase-in range;
• Calculate the Section 199A deduction for an SSTB pass-through business whose owner's taxable income is within the phase-in range;
• Recognize a qualified trade or business; and
• Identify specified service trades or businesses (SSTBs).
Major Topics
Business Owner's Taxable Income Below Threshold
When Taxable Income Exceeds the Threshold
When Taxable Income is Within Phase-In Range
Specified Services Trades or Businesses
