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GLOSSARY OF TERMS
from Sec. 199A
4. What is the definition of “rental real estate enterprises”?
a. An interest in real property or multiple properties held for the production of rents.
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b. A residential real estate property c. A commercial real estate property d. A mixed-use real estate property
5. Which of the following is not a requirement needing to be satisfied during the taxable year with respect to the rental real estate enterprise? a. At least 250 hours of “rental services” must be performed each year with respect to the enterprise, beginning prior to January 1, 2023. b. Separate books and records must be maintained for each real estate enterprise reflecting income and expenses of the enterprise. c. Taxpayers must keep contemporaneous records (i.e., time reports, logs, or similar documents) regarding the number of hours of all services performed for the enterprise, as well as a description of such services, including who the service was performed by and on what date such service was performed.
d. The value of the real estate property must be less than $10,000,000.
6. The §199A deduction of a taxpayer cannot exceed
a. An amount equal to 20 percent of the excess (if any) of the taxable income of the taxpayer for the taxable year, over the net capital gain of the taxpayer for such taxable year.
b. An amount equal to 40 percent of the excess (if any) of the taxable income of the taxpayer for the taxable year, over the net capital gain of the taxpayer for such taxable year. c. An amount equal to 20 percent of the excess (if any) of the net capital gain of the taxpayer for such taxable year. a. An amount equal to 40 percent of the excess (if any) of the taxable income of the taxpayer for the taxable year.
7. What is the definition of “unadjusted basis immediately after acquisition?” a. The adjusted tax basis of the property b. The net book value of the property c. 110% of the cost of the property
d. The basis of qualified property on the date the property is placed in-service date.
8. When computing the Sec. 199A deduction, what is considered to be the “excess amount?” a. 30% QBI over the W-2 Wage/Basis Limitation as otherwise calculated. b. 10% QBI over the W-2 Wage/Basis Limitation as otherwise calculated.
c. 20% QBI over the W-2 Wage/Basis Limitation as otherwise calculated.
d. 27% QBI over the W-2 Wage/Basis Limitation as otherwise calculated.
9. Which of the following is not part of the three-step process to determine the W-2 wage component of the Sec. 199A deduction calculation the taxpayer must properly allocate to QBI? a. Determine the total amount of W-2 wages treated as paid by the taxpayer for the taxable year. b. Allocate the W-2 wages between or among one or more trades or businesses. c. Determine the amount of such wages with respect to each trade or business, which are allocable to the QBI of the trade or business (or aggregate trade or business).
d. Determine the “QBI” of the taxpayer.
10. In order to compute the QBI Component (“QBIC ”) for each trade or business the individual must determine all but one of the following a. 20 percent of the Qualified Business Income for that trade or business.
d. The number of hours the taxpayer works in that trade or business.
GLOSSARY OF TERMS
The “Act” – Tax Cut and Jobs Act (Public Law No. 115-97). “Applicable Percentage” – with respect to any taxable year, 100 percent reduced (not below zero) by the percentage equal to the ratio that the taxable income of the individual for the taxable year in excess of the threshold amount, bears to $50,000 (or $100,000 in the case of a joint return). “Combined Qualified Business Income Amount” – the sum of three separate amounts: (1) 20% of the taxpayer ’s “qualified business income” (QBI) from each “qualified trade or business” (QTB) (as limited by the “wage-basis limit,”); (2) 20% of the taxpayer ’s aggregate “qualified REIT dividends,”; and (3) 20% of the taxpayer ’s aggregate “qualified publicly traded partnership income.” “Depreciable Period” – with respect to qualified property of a trade or business, the period beginning on the date the property was first placed in service by the individual or RPE and ending on the later of (a) the date that is 10 years after such date; or (b) the last day of the last full year in the applicable recovery period that would apply to the property under section 168(c), regardless of any application of section 168(g) (the “alternative depreciation system” (ADS), which generally causes the recovery period of depreciable property to be longer than it would otherwise be under ¬§ 168. “Excess Amount” – equal to 20% QBI over the W-2 Wage/Basis Limitation as otherwise calculated. “Net Capital Gain” – net capital gain (excess of net long-term capital gain for the taxable year over the net short-term capital loss) plus any qualified dividend income for the taxable year. “Phase-In Range” – a range of taxable income, the lower limit of which is the threshold amount, and the upper limit of which is the threshold amount plus $50,000 (or $100,000 in the case of a joint return). “QBI Component (QBIC)” – for each trade or business (including trades or businesses operated through RPEs) the individual must determine the lesser of (1) 20 percent of the QBI for that trade or business (“20% of QBI”); or (2) the greater
of (the “W-2 Wage/Basis Limitation”): (i) 50 percent of W-2 wages with respect to that trade or business, or (ii) the sum of 25 percent of W02 wages with respect to that trade or business plus 2.5 percent of the UBIA of qualified property with respect to that trade or business. “Qualified Business Income (QBI)” – for any taxable year, the net amount of “qualified items” of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer. QBI does not include any qualified REIT dividends or qualified publicly traded partnership income. “Qualified Business or Trade” – any trade or business other than (i) a “specified service trade or business” or “SSTB”, or (ii) the trade or business of performing services as an employee. “Qualified Items of Income, Gain, Deduction, and Loss” – items of income, gain, deduction, and loss to the extent such items are: (1) effectively connected with the conduct of a trade or business within the United States; and (2) included or allowed in determining taxable income for the taxable year. “Qualified Property” – with respect to any trade or business (or aggregated trade or business) of an individual or RPE for a taxable year, tangible property of a character subject to the allowance for depreciation under section 167(a): (a) which is held by, and available for use in, the trade or business (or aggregate trade or business) at the close of the taxable year; (b) which is used at any point during the taxable year in the trade or business’s (or aggregate trade or business’s) production of QBI; and (c) the depreciable period for which has not ended before the close of the individual’s or RPE’s taxable year. “Qualified PTP Income” – the sum of (1) the net amount of such taxpayer ’s allocable share of income, gain, deduction, and loss from a publicly traded partnership, plus (2) any gain or loss attributable to assets of the publicly traded partnership giving rise to ordinary income that is considered attributable to the trades or businesses conducted by the partnership. “Qualified REIT Dividends” – any dividend from a REIT received during the taxable year which: (1) is not a capital gain dividend, and (2) is not qualified dividend income. A REIT dividend is not a qualified REIT dividend if the stock with respect to which it is received is held for fewer than 45 days.
“Reduction Amount” – With respect to any taxable year, the excess amount multiplied by the ratio that the taxable income of the individual for the taxable year in excess of the threshold amount, bears to $50,000 (or $100,000 in the case of a joint return). “Relevant Passthrough Entity” – include partnerships (except for PTPs which are treated separately) and S corporations that are directly or indirectly owned by at least one individual, trust, or estate. A trust is also an RPE to the extent it passes through QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends, or qualified PTP income to a beneficiary or beneficiaries. “Rental Real Estate Enterprise” – an interest in real property [or multiple properties] held for the production of rents. “Rental Services” – may be performed by owners, employees, agents, and independent contractors. They include the following: (i) advertising to rent or lease the real estate; (ii) negotiating and executing leases; (iii) verifying information contained in prospective tenant applications; (iv) collecting rent; (v) daily operation, maintenance, and repair of property; (vi) management of the real estate; (vii) purchase of materials; and (viii) supervision of employees and independent contractors. They do not include financial or investment management activities, such as: arranging financing; procuring property; studying and reviewing financial statements or reports on operations; planning, managing, or constructing long-term capital improvements; or hours spent traveling to and from the real estate. “Specified Service Trade or Business” – any trade or business which is any of the following fields: (i) health; (ii) law; (iii) accounting; (iv) actuarial science; (v) performing arts; (vi) consulting; (vii) athletics; (viii) financial services; (ix) brokerage services; (x) investing and investment management; (xi) trading; (xii) dealing in securities; or (xiii) any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners. “ Threshold Amount” – for any taxable year beginning before 2019, $157,500, (or $315,000 in the case of a taxpayer filing a joint return). This figure will be adjusted by a cost-of-living adjustment on an annual basis.
