It is unclear to me whether a partnership that has a 754 basis adjustment in its underlying property may include the step-up it in qualified property for purposes of the QBI calculation. Please advise. It looks like it does to me, but am ambivalent.
It may. A section 743(b) basis adjustment, caused by a section 754 election, is counted as UBIA for the section 199A calculation. That was not originally the case, but the IRS changed its mind when it finalized the regulations on January 18.