Ben Owns and Operates as a Sole Proprietorship, a Machine

question 3

Essay

Ben owns and operates as a sole proprietorship, a machine repair shop that generates a profit of about $150,000 annually. The business pays wages of about $50,000 annually. The building and most of the equipment is leased so there is no qualified property. Ben files as single and claims the standard deduction. He has a large unrealized gain in bitcoin that he acquired in 2014 and is wondering when he should sell it and whether he should sell it all in one year or over a few years. Advise Ben as to how the sale of the bitcoin and its resulting capital gain can affect his QBI deduction.

---

Definitions:

GAAP

Generally Accepted Accounting Principles, a standard framework of guidelines for financial accounting used in any given jurisdiction.

Bond Discounts

The financial difference observed when a bond's selling price is less than its stated face value upon sale.

Effective-Interest Method

A way of calculating the amortized cost of a bond and the amount of interest expense over its relevant period.

Interest Expense

The cost incurred by an entity for borrowed funds, often reflected in financial statements.