In 2019, Sam and Betty, Each Single, Both Generate Sole

question 25

Multiple Choice

In 2019, Sam and Betty, each single, both generate sole proprietor income of $240,000. Sam's income is generated from a wholesale business whereas Betty's is earned from her law practice. Neither has any employees or qualified assets. Both claim the standard deduction and have other income equal to the standard deduction amount.

• A) Both Sam and Betty will have a QBI deduction of $48,000.
• B) Sam can obtain a QBI deduction, but Betty cannot because of the taxable income level and law practice is a specified service business.
• C) Neither Sam nor Betty will generate a QBI deduction due to their taxable income levels.
• D) None of these.

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Definitions:

Installation Costs

Expenses associated with setting up or installing equipment, machinery, or infrastructure necessary for the operations or activities of a business.

Depreciation Process

The systematic reduction in the recorded cost of a fixed asset over its useful life, reflecting its decrease in value over time.

Matching Principle

An accounting principle that dictates expenses should be recognized in the same period as the revenues they help to generate.

Market Value

The present rate at which a service or asset is available for purchase or sale in the marketplace.