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The 2017 Tax Act introduced §199A to the Internal Revenue Code. In general, §199A grants taxpayers a deduction of up to 20% of the qualified business income of pass-through businesses for tax years beginning after December 31, 2017 and before December 31, 2025. The §199A deduction is available to all non-corporate taxpayers, including trusts and estates, who are owners of a sole proprietorship, partners in a partnership, members of an LLC or shareholders in an S Corporation.

For taxpayers whose income exceeds a certain threshold, the §199A deduction is subject to a number of limitations based on the taxpayer's share of the entity's W-2 wages and the unadjusted basis immediately after acquisition of all qualified property (referred to as "UBIA"). When applied to trusts and estates, these limitations are complicated by the fiduciary income tax structure, which requires allocation of W-2 wages and UBIA among the trust and trust beneficiaries.

On January 18, 2019, the Internal Revenue Service issued final regulations under §199A which clarify the application of §199A to trusts and estates, and also resolve some important issues left open by Congress. An in-depth discussion of §199A and its application to trusts and estates can be found in the Winter/Spring 2019 edition of the Pennsylvania Bar Association Newsletter (see p. 14).


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