QBI - Spidell

QBI

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This topic contains 1 reply, has 2 voices, and was last updated by Lynn Freer 1 week, 2 days ago.

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  • #176390
    Scott Penn
    Participant

    In calculating Box 17V of Form K-1 from an 1120S, is the shareholder’s reasonable wage subject to the QBI income calculation, not the net profit but the QBI. When I read PUB 535 page 51, the bottom of column 1 to the top of column 2, I read that QBI doesn’t include any of the following . . . amounts received as reasonable compensation from an S corporation. Then in IRC Section 199A(c)(4)(A) it states “Qualified business income shall not include reasonable compensation paid to the taxpayer by any qualified trade or business of the taxpayer for services rendered with respect to the trade or business”. My understanding is that beginning with net profit from the S-Corporation, you would leave out the reasonable compensation paid to the shareholder resulting in a larger number for QBI than net profit. That being the case, then box 17W of the 1120S k-1 would be net of the reasonable compensation paid to the shareholder, meaning that box 17W is less than 100% of all the wages paid to all employees of the S-corporation.

  • #176516
    Lynn Freer
    Participant

    The QBI income includes a deduction for all wages paid to all employees and employee/shareholders. The “wages” box, which is for the wage/asset computation, includes all employee compensation including reasonable compensation wages for shareholder/employees. Usually this will be the total wages paid unless for some reason the S corp paid “unreasonable” compensation.