Q1. Maria and Javier are the equal partners in MarJa, a partnership that is a qualified trade or business. In the current year, MarJa had $350,000 of ordinary income aft

Q1. Maria and Javier are the equal partners in MarJa, a partnership that is a qualified trade or business. In the current year, MarJa had $350,000 of ordinary income after reporting $500,000 in guaranteed payments to Maria and Javier for their services to MarJa ($250,000 each).
Question Content Area
a. What is Maria’s and Javier’s qualified business income?
$fill in the blank 8c93c007b066011_1
b. What is Maria’s and Javier’s qualified business income if MarJa had $550,000 of ordinary income after reporting $300,000 in guaranteed payments to Maria and Javier ($150,000 each)?
$fill in the blank 524f6ef71fe707c_1
Q2. Ellie and YiLing are equal owners in Otter Enterprises, a calendar year business. During the current year, Otter Enterprises has $320,000 of gross income and $210,000 of operating expenses. In addition, Otter has a long-term capital gain of $15,000 and makes distributions to Ellie and YiLing of $25,000 each. What is the impact of this information on the taxable income of Otter, Ellie, and YiLing if Otter is (a) a partnership, (b) an S corporation, and (c) a C corporation?
If an amount is zero, enter “0”
Question Content Area
a. If Otter is a partnership, it will report net ordinary business income (loss) of $fill in the blank 99987bffaf83047_1 on its Form 1065. Ellie and YiLing will receive
a Schedule P-1a Schedule K-1a Schedule M-3no schedule from the partnershipa Schedule K-1
and each will report net profit of $fill in the blank 99987bffaf83047_3 and separately stated long-term capital gain of $fill in the blank 99987bffaf83047_4. The 20%/15%/0% preferential tax rate applies to
only the net profitonly the long-term capital gainboth the net profit and long-term capital gainonly the long-term capital gain
for Ellie and YiLing. The partner’s distributions
decreasedo not affectdo not affect
Otter’s taxable income and
areare notare not
reported as income by Ellie and YiLing. The partners’ basis in the partnership is
not affecteddecreaseddecreased
by the distributions.
b. If Otter is an S corporation, it will report net ordinary business income (loss) of $fill in the blank a249c3009fbc061_1 on its Form 1120S. Ellie and YiLing will receive
a Schedule S-1a Schedule K-1a Schedule M-3no schedule from the S corporationa Schedule K-1
and each will report net profit of $fill in the blank a249c3009fbc061_3 and separately stated long-term capital gain of $fill in the blank a249c3009fbc061_4. The 20%/15%/0% preferential tax rate applies to
only the net profitonly the long-term capital gainboth the net profit and long-term capital gainonly the long-term capital gain
for Ellie and YiLing. The corporation’s distributions
a decreasedo not affectdo not affect
Otter’s taxable income and
areare notare not
reported as income by Ellie and YiLing. The shareholder’s basis in the corporation is
not affecteddecreaseddecreased
by the distributions.
c. If Otter is a C corporation, it will report net ordinary business income (loss) of $fill in the blank 1449900acfdafa8_1 on its Form 1120. Ellie and YiLing will receive
a Schedule S-1a Schedule K-1a Schedule M-3no schedule from the C corporationno schedule from the C corporation
. Each will report a net profit of $fill in the blank 1449900acfdafa8_3, separately stated long-term capital gain of $fill in the blank 1449900acfdafa8_4, and dividend income of $fill in the blank 1449900acfdafa8_5. The corporation’s distributions
decreasedo not affectdo not affect
Otter’s taxable income and
areare notare
reported as income by Ellie and YiLing.
Q3. Purple Company has $200,000 in net income for 2021 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,550 standard deduction for 2021 (she has no other deductions). Purple Company is Kirsten’s only source of income.
Ignoring any employment tax considerations, compute Kirsten’s after-tax income for each of the following situations.
Click here to access the 2021 individual tax rate schedule to use for this problem. Assume the corporate tax rate is 21%.
When required, carryout intermediate tax computations to the nearest cent and then round your final tax liability to the nearest dollar.
Question Content Area
a. Purple Company is a proprietorship and Kirsten withdraws $50,000 from the business during the year; Kirsten claims a $37,490 deduction for qualified business income.
Kirsten’s taxable income is $fill in the blank 74d357064075fb9_1, and her after-tax income is $fill in the blank 74d357064075fb9_2.
b. Purple Company is a C corporation and the corporation pays out all of its after-tax income as a dividend to Kirsten.
Note: Individual taxpayers received preferential treatment regarding the taxation of qualified dividends (0%,15%,20%). For single taxpayers, the 0 percent rate applies to the first $40,400 of taxable income.
Purple Corporation’s after-tax income is $fill in the blank f36322041061f8d_1 and Kirsten’s after tax income is $fill in the blank f36322041061f8d_2.
c. Purple Company is a C corporation and the corporation pays Kirsten a salary of $158,000.
Purple Corporation’s after-tax income is $fill in the blank 49bce1f1e03afe0_1 and Kirsten’s after-tax income is $fill in the blank 49bce1f1e03afe0_2.
Q4.Ashley (a single taxpayer) is the owner of ABC LLC. Th3e LLC (which reports as a sole proprietorship) generates QBI of $900,000 and is not a “specified services” business. ABC paid total W-2 wages of $300,000, and the total unadjusted basis of property held by ABC is $30,000. Ashley’s taxable income before the QBI deduction is $740,000 (this is also her modified taxable income).
What is Ashley’s QBI deduction for 2021?
$fill in the blank 1
Q5. Tammy, a single taxpayer, owns and operates LittleCo, a sole proprietorship that is a qualified trade or business. Tammy has $100,000 in qualified business income from LittleCo. She has no other items of income or loss and $25,000 of itemized deductions.
Assume the QBI amount is net of the self-employment tax deduction.
What is her qualified business income deduction for 2021?
$fill in the blank 1
Q6. Jennifer is a CPA and a single taxpayer using the standard deduction. In 2021, her CPA practice generates qualified business income of $162,550 and she has no other items of income, deduction, or loss. Jennifer’s taxable income before the QBI deduction is $150,000 ($162,550 – $12,550 standard deduction). Jennifer employs an administrative assistant in her practice and pays him $75,000 in wages. The unadjusted basis of depreciable assets employed in the practice totals $30,000.
If amount is zero, enter “0”. Assume the QBI amount is net of the self-employment tax deduction.
Question Content Area
a. What is Jennifer’s qualified business income deduction?
$fill in the blank acfdacfceff3fa6_1
b. Determine Jennifer’s qualified business income deduction if her CPA practice generates qualified business income of $273,800.
$fill in the blank bd8daf00a05206f_1
Q7. In 2020, Henry Jones (Social Security number 123-45-6789) works as a freelance driver, finding customers using various platforms like Uber and Grubhub. He is single and has no other sources of income. In 2020, Henry’s qualified business income from driving is $61,200. Assume Henry takes the standard deduction of $12,400.
Click here to access the 2020 individual tax rate schedule to use for this problem.
Question Content Area
Assume the QBI amount is net of the self-employment tax deduction.
a. Compute Henry’s QBI deduction and his tax liability for 2020.
QBI deduction: $fill in the blank d3efbb041fde007_1
Tax liability (round to the nearest dollar): $fill in the blank d3efbb041fde007_2
Question Content Area
b. Complete Henry’s 2020 Form 8995 (Qualified Business Income Deduction Simplified Computation). Enter all amounts as positive numbers.
Form 8995

Department of the Treasury Internal Revenue Service Qualified Business Income Deduction
Simplified Computation
► Attach to your tax return.
► Go to www.irs.gov/Form8995 for instructions and the latest information. OMB No. 1545-2294
2020
Attachment
Sequence No. 55
Name(s) shown on return
Henry Jones Your taxpayer identification number
123-45-6789
Note: You can claim the qualified business income deduction only if you have qualified business income from a qualified trade or business, real estate investment trust dividends, publicly traded partnership income, or a domestic production activities deduction passed through from an agricultural or horticultural cooperative. See instructions.
Use this form if your taxable income, before your qualified business income deduction, is above $163,300 ($326,600 if married filing jointly), or you’re a patron of an agricultural or horticultural cooperative.
1 (a) Trade, business, or aggregation name (b) Taxpayer identification number (c) Qualified business income or (loss)
i Henry Jones Transportation 123-45-6789
fill in the blank a95e9a0f1f8e001_1
ii
iii
iv
v
2 Total qualified business income or (loss). Combine lines 1i through 1v, column (c) . . 2
fill in the blank a95e9a0f1f8e001_2
3 Qualified business net (loss) carryforward from the prior year . . . . . . . . . . . . . . . . . 3 ()
4 Total qualified business income. Combine lines 2 and 3. If zero or less, enter -0- . . . 4
fill in the blank a95e9a0f1f8e001_3
5 Qualified business income component. Multiply line 4 by 20% (0.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
fill in the blank a95e9a0f1f8e001_4
6 Qualified REIT dividends and publicly traded partnership (PTP) income or (loss) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Qualified REIT dividends and qualified PTP (loss) carryforward from the prior year . . 7 ()
8 Total qualified REIT dividends and PTP income. Combine lines 6 and 7. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 REIT and PTP component. Multiply line 8 by 20% (0.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
fill in the blank a95e9a0f1f8e001_5
10 Qualified business income deduction before the income limitation. Add lines 5 and 9 . . . . . . . . . . . . . . . . . . 10
fill in the blank a95e9a0f1f8e001_6
11 Taxable income before qualified business income deduction . . . . . . . . . . . . . . . . . . 11
fill in the blank a95e9a0f1f8e001_7
12 Net capital gain (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13 Subtract line 12 from line 11. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . 13
fill in the blank a95e9a0f1f8e001_8
14 Income limitation. Multiply line 13 by 20% (0.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
fill in the blank a95e9a0f1f8e001_9
15 Qualified business income deduction. Enter the lesser of line 10 or line 14. Also enter this amount on the applicable line of your return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ► 15
fill in the blank a95e9a0f1f8e001_10
16 Total qualified business (loss) carryforward. Combine lines 2 and 3. If greater than zero, enter -0- . . . . . . . . . 16
fill in the blank a95e9a0f1f8e001_11
17 Total qualified REIT dividends and PTP (loss) carryforward. Combine lines 6 and 7. If greater than zero,
enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
fill in the blank a95e9a0f1f8e001_12

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