Scenario: Unicorn Associates is an S corporation for federal tax purposes owned equally by Susan and Jane. Unicorn, Susan, and Jane are all calendar year cash method taxpayers.

In 2020, Susan forms a partnership with Jim, Pegasus Properties, in which Susan holds 80% of the interests and Jim holds 20%. Pegasus purchases a small office building, which it then rents to Unicorn to house Unicorns growing decorating consultation business. Pegasuss only asset is the building, which it purchased for $8 million.

Pegasuss only income in 2020 is the $2 million in rent it receives from Unicorn. It has expenses relating to the building of $1 million. It does not have any permanent employees; Jim works full-time managing the property and providing accounting and administrative services but does not draw a guaranteed salary from the partnership.

Jim is also a calendar year cash method taxpayer. Susan files a Single return, but Jim files a joint return with his spouse. Susan has taxable income of $1.3 million from Unicorn and other sources. Jim and his spouse have no income independent of Pegasus. Neither Susan nor Jim have net capital gains, qualified PTP income, or qualified REIT dividends.

Question: Are Susan and Jim eligible to take a 199A deduction in relation to the net income that flows through to them from Pegasus in 2020? If not, why are they ineligible? If they are eligible, how much would each of Susan and Jim be permitted to deduct?