Page 191 - Small Business IRS Training Guides

Qualified Business Income Deduction
WHO MAY TAKE THE DEDUCTION?

S CORPORATIONS AND PARTNERSHIPS (CONTINUED)

If the partnership or S corporation chooses to aggregate multiple trades or businesses,
it reports the aggregation by filling out Schedule B – Aggregation of Business

Operations, under Worksheet 12-A Specific Instructions, in the 2018 Pub. 535 or

attaching a similar statement. It must attach a copy of Schedule B or similar statement

to each of its owners’ Schedules K-1.

Any direct or indirect owners of the pass-through entity that aggregates must attach a

copy of the pass-through entity’s aggregation to their return. The owners can’t subtract

from the trades or businesses aggregated by the pass-through entity but can add
additional trades or businesses to the aggregation, assuming the aggregation rules are
followed.

In addition, if the partnership or S corporation is a patron of a specified agricultural or
horticultural cooperative, they must attach a statement to the Schedule K-1 showing the

owner’s distributive share of the QBI allocable to a qualified payment received from the

specified agricultural or horticultural cooperative so the owner may compute the patron

reduction under IRC § 199A(b)(7). They must also include the amount of any pass-
through domestic production activities deduction under IRC § 199A(g)(2).

ESTATES AND TRUSTS
Some estates and trusts will claim the QBI deduction in the same manner as an
individual while other estates and trusts will pass-through information to their

beneficiaries so that the beneficiaries may figure their deduction, depending on the

facts.

To the extent that a grantor or another person is treated as owning all or part of a trust

or estate, the owner will compute its QBI, W-2 wages, and UBIA of qualified property
with respect to the owned portion of the trust as if those items had been received

directly by the owner. In the case of a non-grantor trust or estate, generally the trust or

estate will figure the QBI deduction based on the QBI, W-2 wages, and UBIA of

qualified property allocated to the estate or trust. To the extent these items are
allocated to the beneficiaries, the estate or trust must report information to its

beneficiaries in the same manner as an S corporation or partnership so that the
beneficiaries may figure their deduction. In determining the QBI deduction or the

amount that must be passed through to beneficiaries, the estate or trust allocates QBI

items based on the relative proportion of the estate's or trust's distributable net income
(DNI) for the tax year that is distributed or required to be distributed to the beneficiary or

retained by the estate or trust. If the estate or trust has no DNI for the tax year, QBI, W­
2 wages, and UBIA of qualified are allocated entirely to the estate or trust.

May 2019

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