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by the trust or estate. The trust or estate must first make this
determination and then only include the allocable share of
rental real estate items of income, gain, loss, and deduction
on the statement provided to beneficiaries. Rental real estate
that does not meet one of the three conditions noted above
does not constitute a trade or business for purposes of the
QBI deduction and must not be included in the QBI
information provided to beneficiaries.
SSTBs excluded from qualified trades or businesses.
SSTBs are generally excluded from the definition of a
qualified trade or business. An SSTB is any trade or business
providing services in the field of health, law, accounting,
actuarial science, performing arts, consulting, athletics,
financial services, brokerage services, investing and
investment management, trading or dealing in securities,
trust or estate interests, or commodities or any other trade or
business where the principal asset is the reputation or skill of
one or more of its employees or owners. The term “any trade
or business where the principal asset is the reputation or skill
of one or more of its employees or owners” means any trade
or business that consists of any of the following: (a) a trade or
business in which a person receives fees, compensation, or
other income for endorsing products or services; (b) a trade
or business in which a person licenses or receives fees,
compensation, or other income for the use of an individual’s
image, likeness, name, signature, voice, trademark, or any
other symbols associated with the individual’s identity; or (c)
receiving fees, compensation, or other income for appearing
at an event or on radio, television, or another media format.
Exception. If the beneficiary’s taxable income is equal to
or less than the threshold for the reporting 2023 tax year,
$182,100 ($364,200 if married filing jointly), the QBI from the
SSTB may be used by the beneficiary to compute their QBI
deduction. If the beneficiary’s taxable income is within the
phase-in range, the threshold amount plus $50,000
($100,000 if married filing jointly), an applicable percentage
of the QBI, W-2 wages, and UBIA of qualified property from
an SSTB may be used by the beneficiary to compute their
QBI deduction. Therefore, the statement attached to the
Schedule K-1 issued to each beneficiary must identify any
items relating to SSTBs.
Aggregation. A trust or estate engaged in more than one
trade or business may choose to aggregate multiple trades or
businesses into a single trade or business for purposes of
section 199A if it meets the following requirements.
1. The same person, or group of persons, either directly
or through attribution, owns 50% or more of each trade or
business for a majority of the tax year, including the last day
of the tax year, and all trades or businesses use the same tax
year-end.
2. None of the trades or businesses are SSTBs.
3. The trades or businesses to be aggregated meet at
least two of the following three factors.
a. They provide products, property, or services that are
the same or that are customarily offered together.
b. They share facilities or share significant centralized
business elements, such as personnel, accounting, legal,
manufacturing, purchasing, human resources, or information
technology resources.
c. They are operated in coordination with, or reliance
upon, one or more of the businesses in the aggregated
group.
If the trust or estate chooses to aggregate multiple trades
or businesses, it must report the aggregation on Statement B,
or a substantially similar statement, and attach it to each
Schedule K-1. The statement must provide the information
necessary to identify each separate trade or business
included in each aggregation, a description of the aggregated
trades or businesses, and an explanation of the factors met
that allow the aggregation in accordance with Regulations
section 1.199A-4. The aggregation statement must be
completed each year to show the trust’s or estate's trade or
business aggregations. Failure to disclose the aggregations
may cause them to be disaggregated.
The trust’s or estate's aggregations must be reported
consistently for all subsequent years, unless there is a
change in facts and circumstances that changes or
disqualifies the aggregation. The trust or estate must provide
a written explanation for any changes to prior year
aggregations that describes the change in facts and
circumstances.
If the trust or estate directly or indirectly owns an interest in
an RPE that aggregates multiple trades or businesses, it
must attach a copy of the RPE’s aggregation to each
Schedule K-1. The trust or estate cannot break apart the
aggregation of another RPE, but it may add trades or
businesses to the aggregation, assuming the requirements
above are satisfied.
Determining the trust’s or estate’s QBI or qualified
PTP items. The trust’s or estate’s items of QBI that must be
reported to beneficiaries include the allocated amounts of
qualified items of income, gain, deduction, and loss from the
trust’s or estate’s trades or businesses that are effectively
connected with the conduct of a trade or business within the
United States. This may include, but is not limited to, items
such as ordinary business income or (losses), section 1231
gains or (losses), section 179 deductions, and interest from
debt-financed distributions.
QBI may also include rental income (losses) or royalty
income, if the activity rises to the level of a trade or business;
and gambling gains or (losses), but only if the trust or estate
is engaged in the trade or business of gambling. Whether an
activity rises to the level of a trade or business must be
determined at the entity level and, once made, is binding on
beneficiaries.
Qualified PTP items that must be reported to the
beneficiaries include the allocated amounts of the trust’s or
estate’s share of qualified items of income, gain, deduction,
and loss from a PTP and may also include gain or loss
recognized on the disposition of the trust’s or estate’s
partnership interest that is not treated as a capital gain or
loss.
However, QBI and qualified PTP items don’t include any of
the following.
•
Items that are treated as capital gain or loss under any
provision of the Code.
•
Dividends or dividend equivalents, including qualified REIT
dividends.
•
Interest income (unless received in connection with the
trade or business).
•
Wage income.
•
Income that is not effectively connected with the conduct
of a trade or business within the United States (for more
information, go to
IRS.gov and type in the key word
“effectively connected income”).
•
Commodities transactions, or foreign currency gains or
losses described in section 954(c)(1)(C) or (D).
•
Income, loss, or deductions from notional principal
contracts under section 954(c)(1)(F).
Instructions for Form 1041 (2023)
47