Jane Marshall is a shareholder and employee in a corporation that is organized as a pass-through S corporation. The business IS NOT a Specialized Service Trade or Business (SSTB).

Jane Marshall is a shareholder and employee in a corporation that is organized as a pass-through S corporation. The business IS NOT a Specialized Service Trade or Business (SSTB). Jane receives a salary and bonus of $180,000. $80,000 of business income is also passed through to her from the corporation. Jane files a joint return with her spouse, Jake, and takes the $25,100 standard deduction. The couple have $220,000 of other income including Jake's salary.

Jane's portion of 50% of W-2 wages for the corporation's employees is $50,000 and that amount is higher than the wage/capital limitation.

Which statement regarding the deduction for Qualified Business Income correctly applies to this taxpayer?

Question options:

Jane will receive a QBI deduction of 20% of $80,000 as the wage limitation isn't binding in these circumstances.
Jane is not entitled to a QBI deduction.
Jane will be entitled to a reduced QBI deduction because of her income level.

 

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