Exercise 2-21 (Algorithmic) (LO. 3, 4)
In 2021, Henry Jones (Social Security num
Exercise 2-21 (Algorithmic) (LO. 3, 4)
In 2021, Henry Jones (Social Security number 123-45-6789) works as a freelance driver, finding customers using various platforms like Uber and Grubhub. He is single and has no other sources of income. In 2021, Henry’s qualified business income from driving is $130,600. Assume Henry takes the standard deduction of $12,550.
Click here to access the 2021 individual tax rate schedule to use for this problem.
Question Content Area
Assume the QBI amount is net of the self-employment tax deduction.
a. Compute Henry’s QBI deduction and his tax liability for 2021.
QBI deduction: $fill in the blank 5dde4c05dfffff4_1
Tax liability (round to the nearest dollar): $fill in the blank 5dde4c05dfffff4_2
Question Content Area
b. Complete Henry’s 2021 Form 8995 (Qualified Business Income Deduction Simplified Computation). Enter all amounts as positive numbers.
Form 8995
Department of the Treasury Internal Revenue Service Qualified Business Income Deduction
Simplified Computation
► Attach to your tax return.
► Go to www.irs.gov/Form8995 for instructions and the latest information. OMB No. 1545-2294
2021
Attachment
Sequence No. 55
Name(s) shown on return
Henry Jones Your taxpayer identification number
123-45-6789
Note: You can claim the qualified business income deduction only if you have qualified business income from a qualified trade or business, real estate investment trust dividends, publicly traded partnership income, or a domestic production activities deduction passed through from an agricultural or horticultural cooperative. See instructions.
Use this form if your taxable income, before your qualified business income deduction, is above $164,900 ($164,925 if married filing separately; $329,800 if married filing jointly), and you aren’t a patron of an agricultural or horticultural cooperative.
1 (a) Trade, business, or aggregation name (b) Taxpayer identification number (c) Qualified business income or (loss)
i Henry Jones Transportation 123-45-6789 fill in the blank 23be6e03602007a_1
ii
iii
iv
v
2 Total qualified business income or (loss). Combine lines 1i through 1v, column (c) . . 2 fill in the blank 23be6e03602007a_2
3 Qualified business net (loss) carryforward from the prior year . . . . . . . . . . . . . . . . . 3 ()
4 Total qualified business income. Combine lines 2 and 3. If zero or less, enter -0- . . . 4 fill in the blank 23be6e03602007a_3
5 Qualified business income component. Multiply line 4 by 20% (0.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 fill in the blank 23be6e03602007a_4
6 Qualified REIT dividends and publicly traded partnership (PTP) income or (loss) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Qualified REIT dividends and qualified PTP (loss) carryforward from the prior year . . 7 ()
8 Total qualified REIT dividends and PTP income. Combine lines 6 and 7. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 REIT and PTP component. Multiply line 8 by 20% (0.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 fill in the blank 23be6e03602007a_5
10 Qualified business income deduction before the income limitation. Add lines 5 and 9 . . . . . . . . . . . . . . . . . . 10 fill in the blank 23be6e03602007a_6
11 Taxable income before qualified business income deduction (see instructions) . . . . . . 11 fill in the blank 23be6e03602007a_7
12 Net capital gain (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13 Subtract line 12 from line 11. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . 13 fill in the blank 23be6e03602007a_8
14 Income limitation. Multiply line 13 by 20% (0.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 fill in the blank 23be6e03602007a_9
15 Qualified business income deduction. Enter the smaller of line 10 or line 14. Also enter this amount on the applicable line of your return (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ► 15 fill in the blank 23be6e03602007a_10
16 Total qualified business (loss) carryforward. Combine lines 2 and 3. If greater than zero, enter -0- . . . . . . . . . 16 fill in the blank 23be6e03602007a_11
17 Total qualified REIT dividends and PTP (loss) carryforward. Combine lines 6 and 7. If greater than zero,
enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 fill in the blank 23be6e03602007a_12
For Privacy Act and Paperwork Reduction Act Notice, see instructions. Cat. No. 37806C Form 8995 (2021)
