Qualified Business Income Deduction: Section 199A (Portfolio 537)

Tax Management Portfolio, Qualified Business Income Deduction: Section 199A, No. 537, discusses a new provision of the Internal Revenue Code, §199A, which provides a 20% deduction for qualified business income, qualified publicly traded partnership income, qualified REIT dividends, and income of, or received from, certain agricultural or horticultural cooperatives. 

To view this Portfolio, take a free trial to Bloomberg Tax.

 

Bloomberg Tax

This Portfolio is available with a subscription to Bloomberg Tax, a comprehensive research solution including over 500 Tax Management Portfolios™, practice tools, primary sources and timely news.

 

Description

Tax Management Portfolio, Qualified Business Income Deduction: Section 199A, No. 537, discusses a new provision of the Internal Revenue Code, §199A, which provides a 20% deduction for qualified business income, qualified publicly traded partnership income, qualified REIT dividends, and income of, or received from, certain agricultural or horticultural cooperatives. The Portfolio describes the requirements that taxpayers must meet in order to qualify for the deduction, the complex rules that limit taxpayers’ eligibility for the deduction, and the many uncertainties that taxpayers and their advisers face in interpreting the statute.

Authors

Elliot Pisem

Elliot Pisem, partner, Roberts & Holland LLP (1978-present); B.A. in History, Columbia University (1975); J.D., Columbia University (1978); admitted to bar, New York, U.S. District Courts for Southern and Eastern Districts of New York, U.S. Tax Court, Court of Federal Claims; member, New York State Bar Association (Executive Committee of Tax Section; Co-Chair of Section's Committee on Practice and Procedure); contributor, Journal of Taxation, Tax Notes, New York University Institute on Federal Taxation, and other tax periodicals.

Stuart J. Gross

Stuart J. Gross, partner, Roberts & Holland LLP (1982-present); B.S. in Economics, magna cum laude, Yale University (1979); J.D., cum laude, Harvard Law School (1982); member, New York, U.S. Tax Court; member, The Association of the Bar of the City of New York, New York State Bar Association and American Bar Association; author of numerous articles, including “Section 1014 for Liabilities: The Relationship Between The Income Tax and Estate Tax Treatment of Liabilities” (The Tax Club Paper, 2003), “Valuing Liabilities: From Section 2053 to Section 752 (Tax Forum Paper, 2008), “State Law vs. Tax Law: The Role of Public Policy (Tax Forum Paper, 2011) and “Is it a Partnership or a Trust? Are We Done With This Issue?” (Tax Forum Paper, 2014); contributor to numerous tax periodicals.

Ellen S. Brody

Ellen S. Brody, partner, Roberts & Holland LLP (1994-present); B.S. in Economics, magna cum laude, University of Pennsylvania (1991); J.D., cum laude, New York University School of Law (1994); L.L.M. (in Taxation), New York University School of Law (1996); member, New York, U.S. Tax Court, Court of Federal Claims, U.S. Court of Appeals (Federal Circuit) and U.S. Court of Appeals (D.C. Circuit); Certified Public Accountant, South Dakota (1991) and New York (2011); editor, New York University Law Review (1992–1994); member, The Association of the Bar of the City of New York, New York State and American Bar Associations (Sections on Taxation; Litigation), New York State Society of Certified Public Accountants; contributor, Journal of Taxation, Daily Tax Report and other tax periodicals; co-author, 630 T.M., Tax Court Litigation, and 628 T.M., Transferee Liability.

Vivek Chandrasekhar

Vivek Chandrasekhar, associate, Roberts & Holland LLP (2011, 2013–present); B.A. in English Literature, Mathematics, and Physics, with highest distinction, Indiana University (2006); J.D., magna cum laude, New York University School of Law (2011), with membership in the Order of the Coif; law clerk to the Honorable Rosemary S. Pooler, United States Court of Appeals for the Second Circuit (2012–2013); member, New York, U.S. Tax Court, Southern District of New York, Court of Appeals for the Second Circuit, Court of Appeals for the Third Circuit; editor, New York University Law Review (2009–2011); member, New York State and American Bar Associations (Sections on Taxation); co-author, 628 T.M., Transferee Liability.


Table of Contents

Portfolio Description
Authors
Description
Detailed Analysis
I. Introduction
A. Background
B. Predecessor Statutes
1. Section 199
2. Section 1202
II. Basics of the Section 199A Deduction
A. Mechanics
B. Alternative Minimum Tax
C. Partnerships and S Corporations
D. Trusts and Estates
E. Foreign Taxpayers
III. Qualified Business Income
A. In General
B. Qualified Items
1. Definitions
2. Losses
3. Services Income
C. Qualified Trade or Business
1. Trade or Business
2. Definition of Qualified Trade or Business
a. Trade or Business of Performing Services as an Employee
b. Specified Service Trades or Businesses
3. Threshold Amount and Phaseout
D. Wage-Basis Limit
1. In General
2. Wages Test
a. General Rule
b. Professional Employer Organizations and Shared Employers
3. Wages Plus Basis Test
a. General Rule
b. Qualified Property
c. Unadjusted Basis Immediately After Acquisition
(1) In General
(2) Expensing (§179) and “Bonus” Depreciation (§168(k))
(3) Like-Kind Exchanges (§1031) and Involuntary Conversions (§1033)
(4) Property Acquired by Partnership or S Corporation in a Nonrecognition Transaction
(5) Property Acquired by Gift
(6) Property Acquired From a Decedent
d. Anti-Abuse Rules
4. Threshold Amount and Phase-In
E. Section 199A Threshold Amount and Phase-In
1. In General
2. Section 199A Phase-In
a. Phase-In of Wage-Basis Limit
b. Phase-In of SSTB Rule
c. Phase-In of Both Wage-Basis Limit and SSTB Rule
3. Taxpayers With Taxable Incomes Above the Phase-In Amount
F. Aggregation of Qualified Trades or Businesses
IV. Qualified REIT Dividends and Qualified Publicly Traded Partnership Income
Introductory Material
A. Qualified REIT Dividends
B. Qualified Publicly Traded Partnership Income
V. Income from Specified Agricultural or Horticultural Cooperatives
A. Background
B. Basic Structure
C. Qualified Production Activities Income
D. Cooperative-Level Deduction
E. Patron-Level Deduction
F. Affiliated Groups
G. Cooperatives With Oil-Related Qualified Production Activities Income
H. Regulations
VI. Other
A. State Tax Implications
B. Penalties

Working Papers

Table of Worksheets
Worksheet 1 Effective Reduction in Marginal Rate on Qualified Business Income Eligible for the §199A Deduction
Worksheet 2 Comparison of Requirements Applicable to Components of Combined Qualified Business Income Amount
Worksheet 3 Glossary