12/16/18

What is Qualified Business Income (QBI) that entitles a taxpayer to potentially deduct 20% of trade or business profit under the new Section 199A deduction? These are the certain, slam-dunk solid QBI producers:

• Sole proprietorships filed on Schedule C
• Farming operations filed on Schedule F (including CRP payments)
• Pass-through trade or business QBI from partnerships and S-corporations on Schedule K-1
• Certain qualified REIT dividends and pass-through QBI from Publicly Traded Partnerships
• Self-dealing net rental income associated with the above reported on Schedule E

Other items may qualify, but the authority is more tenuous.

• CRP payments to non-farmers not reported on Schedule F (likely)
• Crop share landlord income reported on Form 4835 (probably)
• Pass-through rental QBI from partnerships and S-corps on Schedule K-1 (determined at the entity level, then the individual level)
• Cash rent farm landlord with more than mere investor participation (it depends who you ask)

Trade or business income which does not qualify as QBI:

• Wages from my S-Corp, or guaranteed payments from my partnership
• My W-2 wages

Temporary regulations are filtering out, but it will be years before final regulations and the subsequent litigation answers all of our questions.