QBI puzzles fund managers

BVWireIssue #186-3
March 21, 2018

tax, private equity, Tax Cuts and Jobs Act

flash poll conducted by Baker Tilly Virchow Krause LLP (Baker Tilly) reveals that 36% of fund managers specify qualified business income (QBI) deductions as the greatest challenge faced from the passage of tax reform. New IRC Code Section 199a allows a 20% write-off of QBI for sole proprietors, owners of S corporations, and members of partnerships/LLCs. “When calculating QBI deductions, the mathematics behind it can be exceedingly complicated,” Gregory Kastner, CPA, senior tax manager with Baker Tilly’s financial services practice, said. “Since you need to calculate the deduction at each trade or business level, structures having several partnerships can find this calculation to be a tedious process.”

Extra: The March issue of Business Valuation Update has the first of a two-part article discussing the problems the new QBI deduction poses for valuations of a pass-through entity under the fair market value standard.

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