Problem 10-38 (LO. 7, 8, 9, 11) Barney is a managing LLC member (treated as a general partner) of BG LLC and is allocated qualified business income (QBI) from BG of $800,000. (BG is not a specified service trade or business.) Barney's Schedule K1 reflects a $300,000 share of BG's W2 wages and a $1,200,000 share of BG's UBIA (unadjusted basis immediately after acquisition). Barney's taxable income excluding capital gains is $600,000; and Barney has no income from REITs, publicly traded partnerships, or other qualified businesses. Refer to the QBI discussion in this chapter, the discussion in text Section 2-3, and the flowchart in Concept Summary 2.2.

a. Calculate Barney's deduction under 199A for qualified business income.

Barney's tentative QBI deduction (before considering any limitations) is $fill in the blank . The tentative QBI for this trade or business is subject to the (greater/less) of two limitations. The first limitation is based on the LLC's W-2 wages is $fill in the blank and the second limitation based on the LLC's W-2 wages and property basis is $fill in the blank . Therefore, based on these limitations is Barney's QBI deduction is $fill in the blank .

In addition, barney's QBI deduction is subject to more limitation. which is based on (the difference between income from BG and his taxable income/his taxable income plus his share of BG's wages/his taxable income excluding capital gains) . As a result, Barney's final QBI deduction is $fill in the blank.

b. How does Barney's 199A deduction affect his (1) cash flow, (2) basis in the LLC interest, and (3) capital account?

The QBI deduction (does/does not) require a corresponding outflow of cash. The deduction (does/does not) affect Barney's basis and it (does/does not) affect his capital account.