The AICPA has submitted comments to the IRS and Treasury Department providing recommendations in five areas of the new Sec. 199A:
- Safe harbor for rental real estate
- Deemed trade or business for all commonly-owned arrangements
- Allocation based upon gross receipts
- Unadjusted basis immediate after acquisition (UBIA) on section 734(b) adjustment
- Expansion of the definition of QBI
Of these, I feel the one that applies most directly to small business clients and their tax preparers is the recommendation about allocating deductions proportionately based on QBI, not gross receipts:
Allocation based upon gross receipts – Treasury and the IRS should modify Treas. Reg. § 1.199A-3(b)(1)(vi). Specifically, the AICPA recommended that taxpayers allocate the various deductions, which are not direct deductions of the trade or business, proportionately to the businesses based upon relative positive QBI – not gross receipts.
Read the full article here: AICPA Comments on Qualified Business Income Deduction