Thomas Drake is a small business owner, operating a manufactoring plant in Chicago , Illinois (as an S corporation) He has heard that a new tax break called section 199A (deduction for qualified business income) wherein he may be entitled to a deduction of up to 20% of his qualified business income.If he can qualify for this deduction, it would result in significant tax savings for his business. Consequently, he contacts your accounting firm to find out exactly what this deduction entails, and how , or if, he can qualify. Thomad provides thr CPA firm with the following information regarding his 2018 estimated income from his business, Rebecca, his spouces incont, and asset and payroll information related to his company. ( Thomas and arebecca file married filing jointly.)

net income from operations (S corp). 175,000

spouses (rebecca) income (from unrelated business) 50,000

corporate payroll. 150,000

corporate total assets 1,500,000

taxable income from form 1040. 160,000

your team will prepare a tax research memorandum detailing the statutory framework for this desuction, a thorough explanation of section 199A and all the key definitions, a dwtermination of whether Thonas qualifies for the deduction, a determination of the amount of this deduction, and what thomas could do to maximize this deduction in the future. the memorandum must be supported by tax research using IRC code, tax cases if any, and other scholarly journals and references. since some of this data is estimated, he is asking for a general analysis of his tax situation relative to this deduction.

some specific issues which must be addressed are the following.

1. what is qualified business income (QBI)? What is included and what is not?

2. what is a qualified trade or business (SSTB)?

3. Any limitations, income or otherwise for this deduction?

4. What are some planning strategies to help Thomas maximize this deduction in future years?

5. What is the estimate of the amount of the desiction for 2018, if any?