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:

Real Interest Rate

The interest rate that has been modified to account for inflation, indicating the actual cost of borrowing or the true earnings from savings.

Inflation Rate

This is the percentage rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Nominal Interest Rate

The percentage increase in money that borrowers pay lenders, not adjusted for inflation.

Fisher Effect

An economic theory stating that the real interest rate is independent of monetary measures, particularly the nominal interest rate and expected inflation rate.