1

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:

Form 8995 (Qualified Business Income Deduction Simplified Computation)

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)".

Scenario:

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:

  • PTP1: 100,000

  • PTP2: -50,000

  • PTP3: 80,000

  • PTP4: -10,000

Assuming further, person P's taxable income before QBI dedcution is

(a) 100k

(b) 500k

filing status S (single), no qualified REIT income.

Questions:

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?

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.