Federal Income Tax 2 Discussion Week 6

The article by Thomas Dalton provides nine steps that can be used in compliance with
section 199A. From the report, the first step is to determine the qualified business operations.
The activities will be identified with qualified business income (QBI), and the QBI for each of
the events will be calculated (Dalton, 2019). The second step is to determine the net QBI for all
the activities. Later, the individual will not have to establish the taxable income, which should be
equal to or less than $315,000 for individuals who are married and filing jointly. The amount is
$157,000 for all the other filing statuses. The fourth step is to determine the specified service
trade or business (SSTB) status. The first step in the article is to assess the limitations of the
SSTB, after which the next phase of applying the wages/property limitations follows. Once the
weaknesses are identified, the tentative QBI deductions are calculated in the seventh step
(Dalton, 2019). The income deductions are then determined, and in the last step, the final section
of 199A deductions are calculated. The amount in the final part should be less than the combined
tentative amounts that are deductible.
From the information in the article, I can use the knowledge for a small business client
who has received basic income from a pass-through entity in providing coaching on compliance.
The report has given several strategies for accordance with 199A, and I can use the knowledge to
teach the client how best to compute their new deductions. The coaching will provide the client
with an opportunity to equalize the after-tax cash flow of the profits in distribution and the pass-
through entity with the cash flow after tax.

FEDERAL INCOME TAX 2 DISCUSSION WEEK 6 3

References

Dalton, T. (2019). Proposed Regulations Clarify the IRC Section 199A Deduction. The CPA
journals.