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Qualified Business Income Deduction
WHO MAY TAKE THE DEDUCTION?

ESTATES AND TRUSTS (CONTINUED)
Although estates and trusts may compute their own QBI deduction, they must reduce

the amounts reported as QBI, W-2 wages, and UBIA to reflect the portion of those
amounts that were allocated to beneficiaries.

For more information on trusts and estates, see Treas. Reg, § 199A-6(d).

SPECIFIED AGRICULTURAL AND HORTICULTURAL COOPERATIVES

Cooperatives, to which Part I of subchapter T apply, do not qualify for the QBI deduction

under IRC § 199A(a). However, specified agricultural or horticultural cooperatives may

qualify for the domestic production activities deduction (DPAD) under IRC § 199A(g) for

tax years beginning after 2017, and ending before 2026.

Specified agricultural or horticultural cooperatives are cooperatives subject to part I of

subchapter T that are engaged in the manufacturing, production, growth, or extraction in
whole or significant part within the United States of any agricultural or horticultural
product, or in the marketing of agricultural or horticultural products that have been

manufactured, produced, grown, or extracted in whole or significant part within the

United States by patrons of the specified agricultural or horticultural cooperative. IRC

§199A(g)(3)(D) and (4).

DPAD equals the lesser of 9 percent of:

1. qualified production activities income, which equals the excess of the cooperative’s
domestic production gross receipts for the taxable year over the sum of the costs of

goods that are allocable to the receipts and other expenses, losses, or deductions
(other than the DPAD), which are properly allocable to the receipts (IRC
§ 199A(g)(3)(A)), or

2. taxable income, computed without regard to any deductions for distributions under

IRC § 1382(b) or (c).

However, the resulting figure is limited to 50 percent of Form W-2 wages allocable to
domestic production gross receipts. See IRC § 199A(g)(1)(B)(ii) for more information

W-2 wages.

Note: the domestic production gross receipts are the gross receipts derived from any

lease, rental, license, sale, exchange, or other disposition of any agricultural or
horticultural product, which was manufactured, produced, grown, or extracted by the
specified agricultural or horticultural cooperative (or its patrons in the case of a
marketing specified agricultural or horticultural cooperative) in whole or significant part

within the United States. IRC § 199A(g)(3)(D) and (4).

May 2019

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