1. Micah and Nancy are married and will file jointly. Nancy generates $300,000 of qualified business income from her single member LLC (a law firm). She reports her business as a sole proprietorship. Wages paid by the law firm amount to $40,000; the law firm has no significant property. Micah is employed as a tax manager by a local CPA firm. Their modified taxable income is $400,100 (this is also their taxable income before the deduction for qualified business income).

a) What is Micah and Nancys tentative QBI based on the W2 Wages/Capital Investment Limit?

b) Determine Micah and Nancys allowable QBI deduction for 2022.

2. Micah and Nancy are married and will file a joint tax return. Nancy has a sole proprietorship (not a specified services business) that generates qualified business income of $300,000. The proprietorship pays W2 wages of $40,000 and holds property with an unadjusted basis of $10,000. Micah is employed by a local school district. Their taxable income before the QBI deduction is $400,100 (this is also their modified taxable income). Assume the QBI amount is net of the self-employment tax deduction.

a) What is Micah and Nancys QBI deduction for 2022?

b) What is Micah and Nancys taxable income for 2022?

c) What is Micah and Nancys tax liability for 2022? (use 2022 Tax Rate)

3.Nancy, a single taxpayer, owns and operates a bakery (as a sole proprietorship). The business is not a "specified services" business. In 2022, the business pays $100,000 in W2 wages, has $150,000 of qualified property, and generates $350,000 of qualified business income. Nancy has no other items of income, deduction, or loss and will take the standard deduction of $12,950.

Assume the QBI amount is net of the self-employment tax deduction.

What is Nancy's qualified business income deduction?

4.Micah (a single taxpayer) is the owner of East Bay LLC. The LLC (which reports as a sole proprietorship) generates QBI of $900,000 and is not a "specified services" business. East Bay paid total W2 wages of $300,000, and the total unadjusted basis of property held by East Bay is $30,000. Micah's taxable income before the QBI deduction is $740,000 (this is also his modified taxable income).

What is Micah's QBI deduction for 2022?