Negative QBI Deduction in the Year of Sale

[jskouberdis]

I have done some research on what happens when a business is sold and they have QBI carryover and cannot find if  just goes away in the year of sale or do they have to carry it over indefinitely until it is used up with positive QBI from other companies if subsequent years.  Has anybody out there had this issue.

[rbynaker]

Unresearched (so it's about as useful as something you read from a total stranger on the Internet . . . wait, this IS something you read on the Internet!) but what I recall of QBI CPE from what seems like a decade ago (but really is only a few years), the carryover QBI loss exists on its own.  So I think it will be applied against future QBI.

How do you track that in software?  <shrug>  Probably the same way you track suspended losses from prior passive activities converted to personal use, or from S Corp losses suspended due to lack of basis.  In other words, outside of the software.

Rick

[rbynaker]

Wait, sorry, reading all of the words now.  Sold for a gain, the QBI loss would probably offset any ordinary income from the sale of the business (depreciation recapture, sales of A/R or inventory, etc.)  It can't offset any capital gain though, by statute.  Sold at a loss, yeah, I think it just carries forward until (cross your fingers) this whole nonsense expires in 2025.

Somehow we went from a 2-page tax form to a "postcard" and now to an 8-page tax form.  You know, simplification.

[jskouberdis]

Thanks for your reply.  But I was able to see in the research that Sec. 1250 recapture does not count as ordinary income and is just another form of capital gain taxed at a different rate.  If equipment was sold with ordinary depreciation recapture you could use that as an offset to QBI.  And everything that I have read reinforces what you said about the the negative QBI going on indefinetly.  Thanks reinforcing what I read.

[rbynaker]

Correct, sorry I was thinking equipment, not real estate.  The way I remember it, if you already get some other break (capital gains rates or Unrecap 1250 rate limit) you don't also get a QBID.

I'd have to research what to do next year if you have no QBI.  Do you still file an 8995(-A) to track the losses?  Or do you just keep a worksheet outside of the tax return?  Sounds like a summer research project. 🙂

[dude7707 · Accepted solution]

So just to confirm, QBI carry forward loss, when there is no income in year rental is sold, just remains on 1040 until T/P obtains another rental or did I hear this right until end of 2025 when it expires?

[jskouberdis]

That is my understanding also.