Level 2

Proposed vs. Final Regulations

Forum|Forum|7 years ago
February 16, 2019
2 replies
19 views

The preamble to the Section 199A final regs gives the option of using the proposed regs for 2018 tax returns (all final or all proposed, no cherry-picking). The proposed regs did not contain the provisions about reducing QBI by one-half of SE tax, SE health insurance, and SE retirement plan contribtions. Ror 2018 returns, is it legitimate to use the proposed regs and not make those reductions to QBI?

Qualified Business Income(QBI)

This topic has been closed for replies.

itonewbie

Level 15

I'm not sure I will take the position that none of those apply. If you read the explanation in the final regs carefully, you'll see that northing changed in relation to those items. The Treasury and the IRS clarify that they did not adopt recommendations from various commenters to bifurcate on how some or all of those items should or should not be treated as QBI items because they are attributable to a trade or business and determination of whether any item is treated as attributable to a trade or business is addressed within the existing code sections and regs that govern those items, which they explain is the reason why they will not specifically address other questions raised by other commenters such as those related to unreimbursed partner expenses.

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M

MH13_2Author

Level 2

Thank you for your comment, and I see your point. However, prior to the final regs being issued, I didn't see any commentary that suggested that those items would reduce QBI as trade or business expenses. More importantly, the examples in the proposed regulations did not reduce QBI by those items when there are clearly examples where at least the one-half of self-employment tax deduction would have been in play. That seems like a distinct difference between the proposed and final regs.

itonewbie

Level 15

Perhaps I have missed the examples you cited. I just checked §1.199A-0 Table of Contents in the Prop. Regs but didn't see any related to QBI items attributable to a trade or business. The only emphasis that was placed on SE-tax at that time was that the QBI deduction does not reduce net earnings from SE for the purpose of SE-tax.

Could you clarify where in the Prop. Regs I can find the example so that I can take a second look for my own understanding?

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Intuit_Devin

Level 4

This is an interesting discussion, and I haven't kept up with everything the IRS has published on this particular issue, but I can tell you that verbally the IRS has indicated to industry that they emphatically do NOT consider it reasonable to treat silence on SE deductions in the proposed regs as an affirmative statement not to include them.

itonewbie

Level 15

Good to know. Thanks, Devin!

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