Hello, I am trying to understand if early withdrawl from IRA is included into ordinary income as part of calculating QBI deduction for section 475 election. My question is based on the following article from Forbes:
Forbes says that:
Business stock traders with trader tax status (TTS) are eligible for a 20% qualified business income (QBI) deduction, if they elected Section 475 for ordinary income treatment. Any person who trades consistently and with large volume can qualify for such treatment. QBI includes Section 475 ordinary income and loss and trading business expenses. QBI excludes capital gains and losses, Section 988 forex ordinary income or loss, dividends, and interest income.
I understand IRA early distribution is considered Ordinary Income because it is taxable.
If that TTS trader makes an early withdrawl from IRA, should she be able to get a 20% income deduction on her ordinary income (that includes income from stock trades AND IRA early withdrawl)? For example:
She makes 100K net gain by trading stocks and cryptos
She has expenses for her trading activity of 5K (news, trading S/W, computers, office, etc)
She withdrawls 50K from IRA (early withdrawl since she is < 59 1/2 years old)
So...
100K - 5K + 50K = 145K in $$
Should she be able to claim 20% QBI deduction on 145K resulting in 29K deduction from 145K profit ( 0.2 x 145 = 29)?
Thanks!