Reference no: EM132704811

John and Maria are a married couple. In 2020, Maria worked as an employee at Acme Corporation and John had a retail store which he operated as a sole proprietorship. In 2020, the sole proprietorship had $450,000 of qualified business income. John and Maria had taxable income of $600,000 before considering any qualified business income deduction. John and Maria take the standard deduction of $24,800.

Assume John's sole proprietorship paid w-2 wages of $200,000 and had depreciable assets with an unadjusted basis of $800,000.

Problem a. Determine John and Maria's qualified business income deduction, if any, for 2020. Make sure to show your calculations.

Problem b. Determine John and Maria's taxable income after taking into account all deductions

• The amount of your taxable income (before the qualified business income deduction is factored in) for the year determines whether you can claim the full QBI deduction or whether certain limitations come into play to reduce or prevent the deduction. The taxable income limit is adjusted annually for inflation:
• Standard Tax Deduction: How Much It Is in 2020 and When to Take It. In 2020 the standard deduction is $12,400 for single filers and married filers filing separately, $24,800 for married filers filing jointly and $18,650 for heads of household