I am trying to understand the new QBI (Qualified Business Income) deduction rules in the US. I am confused about the treatment of PTP (Publicly Traded Partnerships) income.
The IRS provides two preliminary Forms:
and Form 8995-A (Qualified Business Income Deduction), which may require the user to first complete associated Schedule A associated with Form 8995-A. My understanding is that this Schedule A is for businesses that are not naturally considered a "Qualified Trade or Business", but rather a "Specified Service Trade or Business". Depending on some income limitations these may still qualify for QBI deduction.
I am not sure what PTP Income really refers to in each of these Forms. In the simplified form, it only appears in line 6, while Schedule A has an entire section (Part II) dedicated to PTP allowing for multiple instances (A, B, and C).
Presumably, Schedule A Part II is only for PTPs that are also a "Specified Service Trade or Business". Line 24 on Schedule A instructs the user to "include" the amount (resulting from doing some math on the above mentioned PTP income) on Form 8995-A, line 28. Form 8995-A line 28 instructs "Qualified REIT dividends and qualified PTP income or (loss)".
Assuming person P is involved in 4 PTPs, two of which (PTP1, PTP2) are considered "Specified Service Trade or Business" and two (PTP3, PTP4) are not. Incomes/Losses are as follows:
Assuming further, person P's taxable income before QBI dedcution is
filing status S (single), no qualified REIT income.
1) In case (a) P must file the simplified Form 8895. Would they enter in line 6 the sum of all PTP incomes, i.e. 100,000 -50,000 +80,000 -10,000 = 120,000?
2) In case (b) they must file form 8995-A including Schedule A. Would they need to:
put on Schedule A line 16 under "A" 100,000, and under "B" -50,000
then, follow the calculations on Schedule A, to get the result in line 24
then, in Form 8995-A line 28 enter: 80,000 -20,000 + result from Schedule A line 24?