Page 170 - BusinessStructures & Forms

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• Section 951(a) inclusions. Don’t add amounts into a single number and report it in
• Section 951A inclusions to the extent allocated to the CFC ! box 17 on Schedule K-1. The section 199A information
under section 951A(f)(2) if the corporation has elected entity CAUTION must be separately identified for each trade or business
treatment under Notice 2020-60. the S corporation directly conducts, including specified service
• Section 1293(a)(1)(A) inclusions. trades or businesses.
• Section 1293(a)(1)(B) inclusions.
The S corporation must make an initial determination of which
In the case of stock of CFCs and QEFs directly or indirectly items are qualified items of income, gain, deduction, and loss at
owned by the corporation with respect to which the corporation its level and report to each shareholder their pro rata share of all
is engaged in a trade or business described in section 1411(c) items that may be qualified items at the shareholder level. These
(2), the corporation must provide the following information (to the items must be separately stated where necessary for the
extent such information isn't otherwise identifiable on the shareholder to figure the deduction. See Determining the S
Schedule K-3), on either an aggregate or an entity-by-entity corporation’s QBI or qualified PTP items, later. The shareholder
basis, or may aggregate this information with other income must then determine whether each item is includible in its QBI.
derived by the corporation that is net investment income under
section 1411(c)(1)(A)(ii). In addition, the S corporation must also report whether any of
• Section 951(a) inclusions. its trades or businesses are specified service trades or
• Section 951A inclusions to the extent allocated to the CFC businesses (SSTBs) and identify on the statement any trades or
under section 951A(f)(2) if the corporation has elected entity businesses that are aggregated.
treatment under Notice 2020-60.
• Section 1293(a)(1)(A) inclusions. Note. The S corporation must report the pro rata share of
qualified items of income, gain, deduction, and loss from a PTP
• Section 1293(a)(1)(B) inclusions.
Section 1296 mark-to-market PFICs. In the case of stock of so that shareholders can determine their qualified PTP income.
PFICs directly or indirectly owned by the corporation for which However, W-2 wages and UBIA of qualified property from the
PTP shouldn’t be reported because shareholders can’t use that
an election under section 1296 is in effect, the corporation must information in figuring their QBI deduction.
provide the following information (to the extent such information
isn't otherwise identifiable on Schedule K-3), on either an S corporations should use Statement A—QBI Pass-Through
aggregate basis or an entity-by-entity basis (except as provided Entity Reporting, or a substantially similar statement, to report
below). each shareholder’s pro rata information from each trade or
• Amounts included in income under section 1296(a)(1). business, including QBI items, W-2 wages, UBIA of qualified
• Amounts deducted from income under section 1296(a)(2). property, qualified PTP items, and section 199A dividends by
In the case of PFIC stock owned directly or indirectly by the attaching the completed statement(s) to each shareholder’s
corporation for which an election under section 1296 is in effect Schedule K-1. The S corporation should also use Statement A to
and with respect to which the corporation is engaged in a trade report each shareholder’s pro rata share of QBI items, W-2
wages, UBIA of qualified property, qualified PTP items, and
or business described in section 1411(c)(2), the corporation may section 199A dividends reported to the S corporation by another
aggregate this information with other income derived by the entity.
corporation that is net investment income under section 1411(c)
(1)(A)(ii). S corporations should use Statement B—QBI Pass-Through
Section 1291 funds. In the case of stock of PFICs directly or Entity Aggregation Election(s), or a substantially similar
indirectly owned by the corporation with respect to which direct statement, to report aggregated trades or businesses and
or indirect shareholders are subject to section 1291, the provide supporting information to shareholders on each
corporation must provide the following information (to the extent Schedule K-1.
such information isn't otherwise identifiable on Schedule K-3), S corporations should use Statement C—QBI Pass-Through
on an entity-by-entity basis. Entity Reporting—Patrons of Specified Agricultural and
• Excess distributions made by a PFIC with respect to which Horticultural Cooperatives, or a substantially similar statement,
the shareholder is subject to section 1291. to report pro rata QBI and W-2 wages allocable to qualified
• Gains derived with respect to the disposition of stock of a payments from a specified agricultural or horticultural
PFIC with respect to which a shareholder is subject to section cooperative for each trade or business. This statement should
1291. also be used to report each shareholder’s pro rata section
Section 199A information (code V). The qualified business 199A(g) deduction reported to the S corporation by the specified
cooperative.
income (QBI) deduction may be taken by eligible taxpayers,
including individuals and some trusts and estates. The The S corporation must also report all QBI information
deduction is determined at the shareholder level. S corporations reported to it by any entity in which the S corporation has an
are required to report information necessary for their ownership interest.
shareholders to figure the deduction. Use the code with an Determining the S corporation’s qualified trades or
asterisk (V*) in box 17 on each shareholder’s Schedule K-1 and businesses. The S corporation’s qualified trades or businesses
enter “STMT” in the entry space to indicate that the information include its section 162 trades or businesses, except for SSTBs,
is provided on an attached statement separately identifying the or the trade or business of providing services as an employee. A
shareholder’s pro rata share of: section 162 trade or business generally includes any activity if
• Qualified items of income, gain, deduction, and loss; the taxpayer’s primary purpose for engaging in the activity is for
• W-2 wages; income or profit and the S corporation is involved in the activity
• Unadjusted basis immediately after acquisition (UBIA) of with continuity and regularity. For more information on what
qualified property; qualifies as a trade or business for purposes of section 199A,
• Qualified publicly traded partnership (PTP) items; and see the instructions for Form 8995, Qualified Business Income
• Section 199A dividends, also known as qualified real estate Deduction Simplified Computation, or Form 8995-A, Qualified
investment trust (REIT) dividends. Business Income Deduction.
Rental real estate. Rental real estate may constitute a trade
or business for purposes of the QBI deduction if the rental real
estate:

-40- Instructions for Form 1120-S (2022)