Rachel Is an Engineer Who Practices as a Sole Proprietor

question 71

Essay

Rachel is an engineer who practices as a sole proprietor. This year, Rachel had net business income of $400,000 from her business. Assume that Rachel pays $150,000 wages to her employees, she has $20,000 of property (unadjusted basis of equipment she purchased last year), has no capital gains, and her taxable income before the deduction for qualified business income is $380,000. Calculate Rachel's deduction for qualified business income.

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Definitions:

Allonge

Accompanying a negotiable instrument, a piece of paper that provides room for an endorsement if no room is available on the instrument itself.

Instrument

A legal document that formalizes an agreement or right, such as a contract, will, or financial instrument.

Endorsement

The act of signing one's name on the back of a check or other negotiable instrument to legally transfer its ownership.

Blank Endorsement

An endorsement on a financial instrument, like a check, where the signature of the endorser is written but no specific endorsee is named, making it payable to the bearer.