"Continuity and regularity" as part of the QBI deduction requirement

[hcarroll1031]

According to TurboTax's system, my business income qualified for the QBI deduction. However, I am still unsure if this is accurate. The IRS's Instructions for Form 8995 states that a business endeavor qualifies if "your primary purpose...is for income or profit and you're involved in the activity with continuity and regularity." I am the only one responsible for the business, so all business activity is done by me. In that sense, I am involved in it with "continuity and regularity." However, due to a personal emergency, I have had to back off of the business endeavor - almost to a stand-still. I still made income from it, and I still have expenses for maintaining the business. The business goal remains income/profit. But as far as the hours put in on a weekly/monthly basis, it is pretty sporadic. I still have to do things like quarterly state tax reports, etc. So, would this still be considered a business endeavor of "continuity and regularity?" 

[Mike9241]

C & R are not defined in the code. The definitions, which vary, are decided by the in conference or the courts if the iRS challenges a taxpayer on these issues and the taxpayer disagrees.

the only warning is that the iRS also has code section 183, where there are losses in an activity - lack of profitability which has nothing to do with C&R

If the gross income derived from an activity for 3 or more of the taxable years in the period of 5 consecutive taxable years which ends with the taxable year exceeds the deductions attributable to such activity (determined without regard to whether or not such activity is engaged in for profit), then, unless the Secretary establishes to the contrary, such activity shall be presumed for purposes of this chapter for such taxable year to be an activity engaged in for profit.

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What also makes it difficult to give guidance is that for a rental real estate activity can qualify for the QBI safe harbor with as little as 250 hours of rental services. What's more, the property owner, other than doing some supervision, doesn't have to do anything. The hours of work of independent contractors providing services to the rental property are includable (record must be kept though). One requirement to qualify as a real estate professional is 750 hours of rental activities which if they meet all the other requirements would qualify then for the QBI.

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C&R is also used to differentiate between a securities trader - gets to deduct investment expenses on schedule C vs investor  - no deduction for investment expenses.  

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In short, you have decided if you qualify. Perhaps discuss your situation with a tax pro that can dig deeper into your situation 

[hcarroll1031]

Thank you for sharing! I really appreciate your thoughts.