I received a trustee fee, reported on 1099 box 3 as other income. How & where do I take the QBI 199A deduction?

[tagteam · Accepted solution]

"How & where do I take the QBI 199A deduction?"

The software will take that deduction automatically if you answer the follow-up questions, that confirm the fee qualifies, after you enter your 1099-MISC. Most importantly, the answer to the question as to whether the fee involved an intent to earn money.

Frankly, unless you are in the business of being a fiduciary (e.g., earn fees as such on a regular basis with intent to make a profit), then the fee would properly be considered Other income and not be subject to self-employment tax nor qualify for the QBI deduction.

[tomwj]

I am going to quote from the Prop Regs under 199A and IRC 1402:
Income from trustee fees constitutes QBI under 199A, unless some part is attributable to investment management services, which is a specified service trade or business. (My trustee fee is NOT attributable to those services). Trustee fees are not “consulting “ income under Treas. Refs. 1.199A-5b because the trustee is not providing advice and counsel to the trust. Rather, the trustee himself is directly carrying out the terms of the trust instrument. Thus, income from trustee fees IS QBI eligible for the 20 percent deduction under 199A, except for the portion attributable to investment services. Moreover, trustee fees earned by a nonprofessional trustee would be exempt from self-employment tax because a nonprofessional trustee is not considered to be in a trade or business.
Therefore, I respectfully disagree with your answer and am still looking for an answer to my question.

[tagteam]

Just trying to help, but I feel compelled to state the obvious which is that your argument is the fees you received as a nonprofessional trustee do not fall within the definition of those provided by SSTB (specified service trades or businesses).

Whether or not I agree with that position is immaterial as you have not cited any authority stating that nonprofessional trustee fees can be considered QBI. You are trying to prove the fees are QBI by stating they do not fall within the definition of SSTB and that just doesn't work (i.e., they can fall outside the definition and still not be QBI).

Regardless, you are NOT going to be able to enter the 1099-MISC, Line 3 figure into TurboTax and get the result you are seeking without generating a Schedule C or a variant thereof.

[tomwj]

I very much appreciate your help and thoughts,  but the authority is in Prop. Regs 199A as I stated. It states that trustee fees that are not attributable to investment services are eligible for the QBI deduction.  At least to me that is pretty clear.  Question: how do I generate a Schedule C and not be subject to SE tax?

[tagteam]

Your profile indicates that you are using the desktop version of Home & Business so you have Forms Mode available, but the only method of getting rid of the SE form and worksheet is to do an override (zero out the figure that TurboTax automatically inputs). Doing so would most likely require printing and mailing your return, but it certainly does not appear as if there is any way around that.

As an aside, I have still been unable to find the language in the proposed regs stating trustee fees not attributable to investment services (or consulting) are eligible for the QBI deduction. If you have an exact section where that is explicitly stated, I would appreciate a cite thereto.

[tomwj]

The info I was given is:  Prop. Treas. Reg. 1.199A-5(b)(2)(xi). My fees are not attributable to investment management services.   Thanks again for your thoughts and help.  May have to do just that.   Hope that helps.

[epple8910]

K-1, Block 20, Code Z (QBI)

[tomwj]

I do not receive a K-1.  This answer does not help me.