Qualified business or trade

• Under QBID, a qualified business or trade can take a deduction of a percentage of qualified income, i.e., income, gains and deduction/loss

Qualified Trade or Business

A qualified trade or business is any IRC $162(a) trade or business, while the term trade or business is one of the most widely used terms in the IRS code, neither the code nor the treasury regulations provides the definition of trade or business. The definition of trade or business comes from common law, where the concept have been developed & redefined by the courts.

3 specific expectations when it comes to QBID:

1. Trade or business conducted by a C Corp.

2. Trade or business performing service as an employee.

3. Customers identified as specified service, trade or business (SSTB) with taxable income that exceeds the yearly threshold amount.

• An SSTB is the trade or business involving the performance of service in the field of health, science, law accounting , actuarial science, performing arts, consulting, esthetics, financial service, investing, investment Management, trading or dealing in certain assets or any trade or business where the principal asset is the reputation of skills of one or more employees or owners.

Percentage of qualified business income a customer can take as a deduction fall in two categories:

1) Qbi component - the first component of deduction equals 20% of qbi from sole proprietor, partnership and S Corp.

Depending on customers taxable income, the first component of the deduction is subject to multiple limitations including:

• Type of trade or business (must be a qualified business)

• Amount of W-2 wages paid by the qualified business

• The unadjusted basis immediately after acquisition (UBIA) a qualified property held by the qualified business.

2) second component is specific to Real estate investment trust (REIT) and publicly traded partnerships (ptp)

Second component of the deduction equals 20% of combined qualified REIT dividends.

• Includes (r e i t) dividends earned through a regulated investment company (Ric) and qualified PTP income or loss.

• The second component is not limited by W2 wages or the ubia of qualifying business property.

• That qualifies may be limited, depending on the type of business engaged by the publicly traded partnership.

Qbi web page found in tax reform section of the IRS website also called section 199a.

And come on through c Corp is ineligible or providing service as employee.