I am preparing a joint return for a husband and wife who own a 3 family residential property...

[wethepeople]

They live on the first floor and rent the second and third floors.

They had net income on Schedule E and I checked the box that indicates they qualify for the QBI deduction.  I use the basic edition and a deduction was computed at 20% of the net rental income.  Is this correct? 

[TaxGuyBill · Accepted solution]

Sure?

Is there any reason why you think it would not be correct?

[wethepeople]

Well, I was concerned as to whether or not there may be issues in connection with the SSTB and/or the UBIA requirements in the TC&JA.

[wethepeople]

It would seem like the 250 hours of total documented rental services activity would eliminate the 'mom and pop' landlords from getting any QBI deduction.  Would you agree?

[abctax55]

 Would you agree?

Nope...it's a facts & circumstances situation.  The 250 hours is *just* a safe harbor; it does NOT preclude a rental being a T/B if facts show otherwise.

And I don't see any way, ever, that a "rental" of real estate would considered a SSTB so the UBIA tests would never be part of the picture

[wethepeople]

Do you agree that the QBI deduction would nor apply to a landlord that spends very little time in the activity.?

[abctax55]

As I said - facts & circumstances.  YOU as the professional preparer are in the position to make that determination, not a faceless internet chick without details.

[wethepeople]

There are no unusual facts and circumstances that apply here. It is a situation where the taxpayer live on the fist floor and rent the second and third floor of their building.  After reading the safe harbor details it would seem to me that a qbi deduction would not apply.