Residential Rental Agreement - First Tuesday: Fill & Download for Free

A2A - Frankly by talking to your CPA. I know this is not what you want to hear but the following is an explaination of the new provision. It is EXTREMELY complex. After reading it I think you will realize that you have not posted anywhere near enough information to get any type of reply that is of use.Making Sense Of The New '20% Qualified Business Income Deduction'Tony Nitti , CONTRIBUTORI focus on tax policy, court decisions and planning opportunities. Opinions expressed by Forbes Contributors are their own.On December 22nd, President Trump signed into law the Tax Cuts and Jobs Act, finalizing a once-in-a-generation overhaul of the existing Code and leaving the once-burdensome tax law so simple, we'll all be preparing our returns on postcards come the spring of 2019.HAHAHAHAHAHA/wipes tear from cheekSimple. That's rich. I'll make a deal with you: how about we spend some time diving into just one aspect of the bill -- the new deduction bestowed upon owners of sole proprietorships, S corporations, and partnerships -- and then you decide for yourself just how simple this all will be?For those of you who are familiar with the format of a "Tax Geek Tuesday," you know what to expect. For those of you who are new to this space, what we do here is beat the heck out of a narrow area of the tax law. In great, painstaking, long-form level of detail. The hope, of course, is that we can accomplish what Congress can't: making the law more manageable for those who need to apply it. Let's get to it.Entity Choice Under Current LawIf you want to operate a business, there are four main choices for doing so:1.C corporation2.Sole proprietorship3.S corporation4.PartnershipOwners of a "C corporation" are subject to double taxation. When income is earned by the corporation, it is first taxed at the business level, at a top tax rate of 35% under current law. Then, when the corporation distributes the income to the shareholder, the shareholder pays tax on the dividend, at a top rate of 23.8%. Thus, from a federal tax perspective, owners of a C corporation pay a combined total rate on the income earned by the business of 50.47% (35% + (65% * 23.8%)).Of course, you don't have to operate as a C corporation. Instead, you can operate a business as a sole proprietorship. Or as an S corporation. Or as a partnership. And what do these three business types have in common? They all offer a single level of taxation: when income is earned at the business level, it is generally not taxed at that level; rather, the income of the business is ultimately taxed only once, at the individual level.A sole proprietor simply reports his or her income directly on Schedule C. In the case of an S corporation or a partnership (the so-called "flow-through entities), the income of the business is allocated among the owners and then included on their individual returns. In either scenario, the business owner pays tax on their share of the income at ordinary rates, which rise to as high as 40.8% under current law (39.6% top rate plus a 1.2% phase out of itemized deductions for high earners).So to summarize, under current law, the top effective tax rates paid by C corporations versus other business types are:·C corporations: 50.47%·Sole proprietors/shareholders in an S corporation/partners in a partnership: 40.8%Entity Choice Under the New LawRegardless of how the plan may have been sold to the public, the foundation of the recently-enacted Tax Cuts and Jobs Act was the reduction in the C corporation tax rate from 35% to 21%. But Congress couldn't do this in isolation, because such a a one-sided dramatic decrease would cause the business playing field to tilt, with sole proprietors and owners of flow-through entities losing much of their advantage over their corporate competitors. To wit, the effective combined rate on corporate owners would become 39.8% (21% + (79%*23.8%), while the top rate on ordinary individual income -- the rate applied to the income of sole proprietors and owners of flow-through entities, whether distributed or not -- would become 37%. Thus, the advantage of a single level of taxation would shrink from 10% to just 2.8%.While many politicians tend to treat S corporations and partnerships as replacement terms for "small business," the reality is quite the opposite -- many of the largest businesses in America are operated as flow-through entities. As a result, there was tremendous pressure on the tax reform process to provide a break to owners of flow-through businesses so they weren't left out in the cold with the corporate tax cuts.After the House and Senate initially approached the non-corporate tax break from very different angles, the final law found some common ground, resulting in the creation of Section 199A, a new provision of the Code. On its surface, Section 199A will allow owners of sole proprietorships, S corporations and partnerships -- and yes, even stand-alone rental properties reported on Schedule E -- to take a deduction of 20% against their income from the business. The result of such a provision is to reduce the effective top rate on these types of business income from 40.8% under current law to 29.6% under the new law (a new 37% top rate * a 20% deduction= 29.6%).Courtesy of this new deduction, sole proprietors and owners of flow-through businesses retain their competitive rate advantage over C corporations: it is 10% under current law, and will be 10% under the new law (39.8% versus 29.6%).New Section 199A, however, is anything but simple, and the 20% deduction is far from guaranteed to business owners. Claiming the new deduction requires navigating a tangle of limitations, terms of art, thresholds, and phase-ins and phase-outs, with one critical definition thrown in the mix that could potentially jeopardize the whole damn thing.It's not every day that we get handed a brand spankin' new section of the Code to wrap our arms around. But over the coming months, tax advisors and business owners will be tasked with doing just that. To speed up that process, I figured we should tackle new Section 199A in a Tax Geek Tuesday, and approach this uncharted territory in the best way we know how in this space: with a little bit of Q&A.But I'm warning you: this is going to get looong. So for ease of future reference , I will break the Q&A into sections so that you can key in on those areas of need. Let's jump in.Overview of the QBI DeductionQ: A 20% deduction. How hard can this be? First things first: Who gets to take it? Is it available to all taxpayers? Like, corporations, individuals, partnerships, etc...?A: That's actually FOUR questions, which tells me that you really don't understand how a Q&A works. But I get the gist of what you're asking. Section 199A(a) makes clear that the deduction is available to all taxpayers other than a corporation. This would certainly seem to indicate that if an S corporation or partnership has an interest in a lower-tier flow-through entity, the upper-tier S corporation or partnership will have to determine its deduction first, before determining the amount of its income to pass through to its ultimate shareholders or partners. In fact, Section 199A(f)(4)(B) provides that regulations are coming to tell us how to determine the deduction in the case of tiered entities, so yes, it appears that this is in fact the case.It's also worth nothing that at the last minute, Congress decided to allow the 20% deduction to trusts and estates that own an interest in a flow-through business. Rules under (now-repealed) Section 199 will be provided to determine how a trust or estate determines it's share of the "W-2 wages" and "adjusted basis" limitations we're going to discuss in detail below.Q: Got it. Sounds like trusts, estates, individuals, and even S corporations and partnerships are eligible for the 20% deduction. So now can you just tell me how the 20% deduction works?A: Sure, I'll do just that....over the next 9,000 words. We've got a number of terms to define, thresholds to establish, and computations to work through. But let's start with this concept: starting January 1, 2018, anyone who generates "qualified business income" will be entitled to take a deduction of 20% of that qualified business income on their tax return. That is, until the limitations set in.Let's start by showing how the formula works, and then we'll break it all down, piece by piece.The deduction is equal to the SUM OF:1.The LESSER OF:·the "combined qualified business income" of the taxpayer, or·20% of the excess of taxable income over the sum of any net capital gain2.PLUS the LESSER OF:·20% of qualified cooperative dividends, or·taxable income less net capital gain.Next, let's simplify things a touch. We're going to focus our attention on the first half of the provision,and leave the "cooperative dividends" section for another day. That leaves us with this:The deduction is equal to the SUM OF:1.The LESSER OF:·the "combined qualified business income" of the taxpayer, or·20% of the excess of taxable income over the sum of any net capital gain2.PLUS the LESSER OF:·20% of qualified cooperative dividends, or·taxable income less net capital gain.Next, let's look the the formula for the first bullet: the determination of the "combined qualified business income" of the taxpayer, and then we'll start tearing this provision to pieces:Combined qualified business income is actually not income, but rather a deduction. It is:1.THE SUM OF:·The LESSER OF:·20% of of the taxpayer's "qualified business income" or·THE GREATER OF:·50% of the W-2 wages with respect to the business, or·25% of the W-2 wages with respect to the business plus 2.5% of the unadjusted basis of all qualified property.2.PLUS:·20% of qualified REIT dividends·qualified publicly traded partnership income.·Q: I don't understand a single thing you just wrote. Please tell me this gets better.A: Have some patience, man. We just got started. Let's knock out the easy part first, by starting with the second half of the equation. Starting January 1, 2018, you will be able to take a 20% deduction against your 1) REIT dividends, and 2) qualified publicly traded partnership income.A "qualified REIT dividend" is any dividend from a real estate investment trust that isn't either:·a capital gain dividend, or·a qualified dividend."Qualified publicly traded partnership income" is the net amount of any qualified business income (defined below) from a PTP, plus any gain on the sale of a PTP interest that is included in your ordinary income.Q: That's helpful and all, but I"m really not here to read about REITs and PTPs. I want to understand the first half of the equation, where we can deduct 20% of our income from sole proprietorships, S corporations and partnerships. Can we get to that now?A: Why, yes. Yes we can. Let's focus on this part for the rest of our time together. You will be entitled to deduct, beginning in 2018, the LESSER OF:·20% of of the taxpayer's "qualified business income" or·THE GREATER OF:·50% of the W-2 wages with respect to the business, or·25% of the W-2 wages with respect to the business plus 2.5% of the unadjusted basis of all qualified property.·Let's take it line-by-line, starting with the definition of "qualified business income."Qualified Business IncomeQ: Give it to me. What is "qualified business income?"A: Will do, but first things first: if I'm going to have to type out "qualified business income" over and over again, I'm going to lose interest in writing this article in a hurry. So let's agree to use "QBI" for short, shall we?QBI is actually pretty simple; it's defined in Section 199A(c) as the "ordinary" income -- less ordinary deductions -- you earn from a sole-proprietorship, S corporation, or partnership. QBI does not include, however, any wages you earn as an employee. This means that, yes, beginning in 2018, you could have two people doing the exact same job -- one as an independent contractor and one as an employee -- with the self-employment income of the former being considered QBI (and thus eligible for a 20% deduction), while the wages earned by the latter would not be eligible for the 20% deduction.Q: So why would anyone want to be an employee going forward? Why won't everyone just rearrange their relationship with their employer to become an independent contractor?A: Good question. First, keep in mind, you can't just call yourself whatever you like. The IRS employs factors to determine who is an employee and who is an independent contractor, so it can ensure it's collecting payroll taxes from the truly responsible party. The primary factor is the "degree of control" the service recipient has over the service provider; in other words, if you're required to work 9-5 every day down at the cracker factory, well, you're an employee, regardless of what you might call yourself.And don't forget, there are advantages to being an employee. For starters, your employer is on the hook for half of the payroll taxes; become an independent contractor, and you're paying the full 15.3% of Social Security and Medicare tax up to the Social Security wage base ($128,400 in 2018), and then the full 2.9% on income above that threshold.In addition, employees are eligible for a host of fringe benefits that can be provided by an employer. Tax-free health insurance and employee game rooms can be tough to walk away from. Before you go rushing off to become an independent contractor to save some loot, you've got to take those things into consideration.Q: Fair enough. So let's go back to someone who owns an interest in an S corporation or a partnership. Do you just add up all of the lines on the Schedule K-1 and call the result "QBI" eligible for the deduction?A: Absolutely not. QBI does NOT include the following items of investment income:·short-term capital gain or loss;·long-term capital gain or loss;·dividend income; or·interest income.If you are a shareholder or a partner in a flow-through business, it is important to note that QBI also doesn't include any wages or guaranteed payments received from the business. To illustrate, if you own 30% of an S corporation that pays you $40,000 of wages and allocates you $80,000 of income, your QBI from the S corporation is ONLY the $80,000 of income; the $40,000 of wages do not count. And as we'll talk about (much) later, if you're a shareholder in an S corporation who provides significant services and you don't pay yourself any wages, the IRS may treat you as if you took wages anyway, in which case this "reasonable compensation" will not be treated as QBI.QBI also doesn't include any income that's not "effectively connected with the conduct of a U.S. trade or business," but that's a rabbit hole I"m not willing to go down in this article.So in summary, when starting the process for determining the amount of the deduction, begin by adding up all of the items of income and deduction on a Schedule K-1 OTHER THAN the aforementioned bullet points. That's your QBI.Q: QBI has "business" smack dab in the middle of it. Does that mean that to be eligible for the deduction, the activity has to rise to the level of a "business?" I know that is kind of a nebulous standard in the tax law, and I thought a lot of rental properties don't really count as a "business" for many purposes. Does that mean that if I own a single rental property in my individual capacity that I report on Schedule E, and that property produces income, I won't be entitled to a 20% deduction against the income?A: You know...you're smarter than you look. Here's what we know: clearly, the 20% deduction is intended to apply to rental income, because a last-minute change was made to the limitation on the deduction (as discussed in detail below) specifically to accommodate rental owners.But here's what we don't know:Section 199A(c)(c) requires only that QBI be earned in a "qualified trade or business," and that language is a bit scary. Why? Because as crazy as it sounds, the term "trade or business" is not well defined by the tax law. In fact, there are a number of different interpretations of what constitutes a trade or business for different purposes of the Code. The highest standard, however, is that of a "Section 162" trade or business, and in order for an activity to achieve this standard, the business must be regular, continuous, and substantial.Over 100 years of judicial precedent has not provided much insight into whether a rental activity rises to the level of a "Section 162 trade or business." The determination depends on many factors: How long is the lease? Is the lease gross or triple net? What type of property is being leased?As you've probably guessed, this new statutory language is rife with peril. When Section 199A(d) requires that QBI be earned in a "trade or business," does it mean a "Section 162 trade or business?" And even if it doesn't, because it doesn't specifically say it DOESN'T require a Section 162 trade or business, will the courts interpret "trade or business" in Section 199A to mean a Section 162 trade or business?And if that's the case, will some rental activities NOT rise to the level of a Section 162 trade or business --as is currently the case under the law -- precluding owners of the activities from claiming the 20% deduction?I wish I could provide a more concrete conclusion, but this is the tax law we live in. For example, the net investment income tax rules of Section 1411 also refer regularly to the concept of a "trade or business," but those regulations: 1. make clear that they are referring to a Section 162 trade or business, and 2. take great pains to allow rental owners to not HAVE to try and navigate a century's worth of muddled case history in order to determine whether their rental activities rise to the level of a Section 162 trade or business.Section 199A, however, is in its infancy. We don't have regulations. We only have a blanket reference to a "trade or business," which without further clarity, I would think HAS to be interpreted to mean a Section 162 trade or business. Which means, yes, certain rental activities may not meet this definition -- for example, a triple-net lease where the owner has almost no regular involvement -- thereby denying the owner a 20% deduction.Q: Man, am I ever sorry that I asked. How about we agree to check back in on that one when the IRS offers some explanation, OK? Good. So once I've got QBI, I just multiply by 20%, right? If my share of ordinary income from an S corporation or partnership or sole proprietorship is $400,000, I just take $400,000 * 20% and deduct the resulting $80,000 on my tax return, right?A: Not quite. You computed the $80,000 correctly, but your work has just begun. This is when the limitations kick in.W-2 LimitationsQ: Wait a second...what are these limitations you speak of?A: There are several. Some are quantitative, others are business based. Let's start with the numerical limitations. You are only entitled to deduct 20% of QBI up to a limit. That limit is the GREATER OF:·50% of your allocable share of the "W-2 wages" paid by the business, or·25% of your allocable share of the "W-2 pages" paid by the business PLUS 2.5% of your allocable share of the "unadjusted basis" immediately after acquisition of all "qualified property."Q: Those limitations contain a lot of italics and terms in quotations. That means this is a giant pain in the ass, isn't it? Why does it have to be this way?A: That's two questions, so you're still not getting the gist of this Q&A thing, but here goes:First, yes, these limitations are a pain in the ass.Second, there is a good reason why those limitations exist -- they are intended to prevent abuse of the new system. Consider the following illustration:I'm a partner at a BIG, PRESTIGIOUS ACCOUNTING FIRM. I am also, however, an employee; one who collects a wage. Now, let's just assume that my annual wage is $800,000 (it is not). With the new rules coming down and offering a 20% deduction against my income, what would prevent me from quitting my current gig, and then having my firm engage the services of "Tony Nitti, Inc." a brand new S corporation I've set up specifically to facilitate my tax shenanigans? Now, my firm pays that same $800,000 to my S corporation, and my S corporation simply allows that income to flow through to be as QBI. I, in turn, take a 20% deduction against that income, reducing my income to $640,000. See the problem?My role at my firm hasn't changed. I provided accounting services before, I provide accounting services now. But before, I was receiving wages taxed at ordinary rates as high as 37%. Now, by converting to an S corporation and foregoing wages in favor of QBI, I am now paying an effective rate on that income of only 29.6% (37% * 80%). That's not fair, is it? Compensation for services should be taxed at the same rate, whether it's coming to me as a salary or flow-through income.To prevent these abuses, Congress enacted the W-2 limitations. Because, in my example, Tony Nitti, Inc. does not pay any wages, in both scenarios my limitation would be a big fat ZERO, meaning I get no deduction. Like so:My deduction is the LESSER OF:1.20% of $800,000, or $160,000, or2.The GREATER OF:1.50% of W-2 wages, or $0, or2.25% of W-2 wages, or $0, plus 2.5% of the unadjusted basis of the LLC's assets, or $0, for a total of $0..Q: That actually does make some sense. Now that you've explained why the limitations exist, maybe you could explain how they work, particularly all of those terms you put in italics an quotes. For example, why did you italicize your allocable share over and over again?A: Because it has been my experience that you only learn through repetition, that's why. And here's the thing: I've already heard people make the mistake of suggesting that a shareholder's or partner's limitation is based on 50% or 25% of the TOTAL W-2 wages paid by the business. That would only be the case if you happen to be the sole owner of the business. If you're not, then you have to first determine your allocable share of the W-2 wages.Q: This is going to require some clarification. First, what exactly are W-2 wages? Do things like management fees or payments to independent contractors count? And then, how does a shareholder or partner determine his or her share of the partnership's W-2 wages?A: Let's take those one by one. First, W-2 wages are exactly that: wages paid to an employee, INCLUDING any elective deferrals into a Section 401(k)-type vehicle or other deferred compensation. W-2 wages do NOT INCLUDE, however, things like payments to an independent contractor or management fees, because new Section 199A(b)(4)(C) clearly states that an amount is not a W-2 wage for these purposes unless it shows up on a payroll tax return.Next, how we do determine a shareholder or partner's allocable share of W-2 wages? For a shareholder in an S corporation, it's a piece of cake: Section 1366 and Section 1377 require that all items of an S corporation be allocated pro-rata, on a per-share/per-day basis.Things get a bit more tricky for a partner in a partnership, however, because partnerships can -- subject to the substantial economic effect rules of Section 704(b) -- "specially allocate" different items of income, gain, loss and deduction among its partners at different percentages. Thus, without concrete guidance, it would be unclear how a partner in this type of partnership determines their share of the W-2 wages.Luckily, Section 199A(f)(1) tells us that a partner's share of a partnership's W-2 wages is, quite logically, determined in the same manner as his share of the partnership's wage deduction. Thus, if you are own a 20% capital stake in a partnership, but under the terms of the agreement you are allocated 80% of any depreciation but only 30% of Schedule K-1, Line 1 ordinary income, then because you are being allocated 30% of the partnership's wage deduction via your Line 1 allocation, you are stuck being allocated only 30% of the partnership's W-2 wage expense for the purposes of these limitations.Here's an example:A is a 30% owner of ABC, LLC. The LLC produced total ordinary income of $3,000,000. The LLC paid total W-2 wages of $1,000,000, and the total adjusted basis of property held by ABC, LLC is $100,000. A is allocated 30% of all items of the partnership.A is entitled to a deduction equal to the LESSER OF:TotalA's Allocable Share (30%)20% DeductionQBI$3,000,000$900,000$180,000And the GREATER OF:TotalA's Allocable Share (30%)50% LimitationW-2 Wages$1,000,000$300,000$150,000or the TOTAL OF:TotalA's Allocable Share (30%)25% Limitation2.5% LimitationTotalW-2 Wages$1,000,000$300,000$75,000$75,000Unadjusted basis of property$100,000$30,000$750$750Total$75,750Thus, A is entitled to a deduction of $150,000, the lesser of:·$180,000, or·the greater of:·$150,000 or·$75,750.Q: I noticed that the second limitation is based not only on W-2 wages, but also the partner's or shareholder's allocable share of 2.5% of the "unadjusted basis" of "qualified property." Explain.A: That's more of an order than a question, but here goes. Let's start with "qualified property:" this is defined in Section 199A(b)(6)(A) as any tangible property, subject to depreciation (meaning inventory doesn't count), which is held by the business at the end of the year and is used -- at ANY point in the year -- in the production of QBI. But there's a catch: if you're going to count the basis towards your limitation, the "depreciable period" of the period could not have ended prior to the last day of the year for which you are trying to take the deduction.The depreciable period -- and I've seen a LOT of confusion about this -- starts on the date the property is placed in service and ends on the LATER OF:·10 years, or·the last day of the last full year in the asset's "regular" (not ADS) depreciation period.To illustrate, assume S Co. purchases a piece of machinery on November 18, 2014. The machinery is used in the business, and is depreciated over 5 years. Even though the depreciable life of the asset is only 5 years, the owners of S Co. will be able to take the unadjusted basis of $10,000 into consideration for purposes of this second limitation for ten full years, from 2014-2023, because the qualifying period runs for the LONGER of the useful life (5 years) OR 10 years.Consider the same facts, only the asset is a non-residential rental building that is depreciated over 39 years. The shareholders of S Co. will be able to take their share of the building's basis into consideration from 2014-2052, the last full year of the asset's depreciation schedule.Four quick notes:1.The basis taken into consideration is "unadjusted basis," meaning it is NOT reduced by any depreciation deductions. In fact, Section 199A(b)(2)(B)(ii) requires that you take into consideration the basis of the property "immediately after acquisition."2.Any asset that was fully depreciated prior to 2018, unless it was placed in service after 2008, will not count towards basis.3.Just as with W-2 wages, a shareholder or partner may only take into consideration for purposes of applying the limitation 2.5% his or her allocable share of the basis of the property. So if the total basis of S corporation property is $1,000,000 and you are a 20% shareholder, your basis limitation is $1,000,000 * 20% * 2.5% = $5,000.4.If you are a partner in a partnership, you must allocate your share of asset basis in the same manner in which you are allocated depreciation expense from the partnership. So go back to my earlier example where a partnership allocated W-2 wages, and the partner owned 20% of the capital of a partnership, was allocated 80% of depreciation, and only 30% of Schedule K-1, Line 1, ordinary income or loss. While that partner would be allocated 30% of the W-2 wages paid by the partnership, he or she would be allocated 80% of the unadjusted basis of the property, because that is the percentage of depreciation he is allocated.Q: That's a lot to take in. I've gotta' ask: I understand that the point of the "50% of W-2 wages" limitation was to prevent abuses where people forego salary for tax-favored flow-through income, but what's the point of this second limitation, the one that allows for the 20% deduction up to 25% of your share of W-2 wages PLUS 2.5% of your share of the unadjusted basis of the property?A: That second limitation, my friend, is a prime example of how the sausage really gets made on Capitol Hill. Follow along:Under the House bill, owners of S corporations and partnerships would have gotten a top 25% tax rate on their income. Unfortunately, the only way to get the 25% rate on ALL income was to be a "passive owner." Who are passive owners? Those that either:1.Own rental real estate, or2.Own non-rental businesses, and don't show up at work enough to "materially participate."Thus, under the House bill, rental income would have been taxed at a top rate of 25%.The Senate bill, however, took a different tack in trying to bestow a benefit on flow-through business owners. Rather than incentivize people to work less with the promise of a 25% tax rate, the Senate offered the deduction we're dealing with now, without differentiating between "passive" and "nonpassive" business owners. But in the initial Senate bill, the deduction would have simply been capped at 50% of each owner's share of the W-2 wages of the business; this "share of property basis" rule didn't exist.And here's the problem with that: most large rental activities don't pay W-2 wages; instead, they tend to pay management fees to a management company. As a result, if the law hadn't been massaged, owners of large rental empires would have gotten no 20% deduction, meaning they would be paying 37% on their rental income as opposed to 25% under the House bill. And that wasn't going to fly.So at the 11th hour, the conference committee added in this SECOND limitation, allowing for a 20% deduction up to the GREATER of:1.50% of W-2 wages, or2.25% of W-2 wages PLUS 2.5% of unadjusted basis of property.This made President Trump Senator Corker rental owners very happy, because they were suddenly eligible for a deduction they otherwise wouldn't' have gotten. To illustrate:A owns a 50% interest in a commercial rental properties through an LLC. A's share of the rental income of the LLC is $1,500,000. The LLC pays no W-2 wages, rather, it pays a management fee to an S corporation A controls. The management company pays W-2 wages, but also breaks even, passing out no net income to A. A's share of the total unadjusted basis of the commercial rental property is $10,000,000.Until mere days before the final legislation was agreed upon, A would not have been entitled to a 20% deduction against his $1.500,000 of QBI, because he ran up against the 50% of W-2 wages limitation ($0). After the 11th hour change, however, A is now entitled to a deduction - assuming the rental activities rise to the level of a Section 162 business, as discussed above -- equal to the LESSER OF:1.20% of QBI of $1,500,000 ($300,000) or2.2.5% of the unadjusted asset basis of $10,000,000 ($250,000).As a result, A grabs a $250,000 deduction that was very nearly nil.Q: Couldn't all this be avoided if someone was permitted to elect to group all of their businesses or rental activities together? For example, say someone owns 20 rental properties through 20 different LLCs -- with none of them paying W-2 wages -- but also owns a property management company that pays SIGNIFICANT W-2 wages. Why can't they just elect to group the 20 rentals with the management company, pulling in the W-2 wages for purposes of the limitation?A: It's an interesting point, but as of right now, it certainly appears that the 20% deduction will be required to be computed with respect to each separate business owned by the individual. For starters, Section 199A(b)(1)(A) requires that the deduction be computed for "each" qualified trade or business. And then there's the fact that the provision works in terms of "businesses," rather than "activities," so it appears that Section 199A would not be able to leverage off of the existing elective grouping regime of Section 469 that applies to "activities." So for now, at least, I think we can count on computing the deduction for each separate business.Q: Understood. So the bill is good for big landlords, but what about the little guy? What if I earn $150,000 from my small business LLC, but the business pays, for example, only $10,000 of wages and has no significant property? Am I limited to taking only a $5,000 deduction, equal to the LESSER OF:1.QBI of $150,000 * 20%, or $30,000, or2.50% of W-2 wages of $10,000, or $5,000A: At first blush, that's exactly what would happen. But the new law isn't justabout trying to help the Monte Burns of the world; it offers something to your average Joe Sixpack as well, in the form of an exception to the W-2 limit.Exception to W-2 Wage LimitationsQ: Hey, I'm an average Joe Sixpack! Kindly explain how this exception would work.A: Here goes: Section 199A(b)(3)(A) provides that if your TAXABLE INCOME for the year -- not adjusted gross income, not QBI, but TAXABLE INCOME -- is less than the "threshold amount" for the year, then you can simply ignore the two W-2-based limitations. The "threshold amounts" for 2018 are $315,000 if you are married, and $157,500 for all other taxpayers. These amounts will be indexed for inflation starting in 2019. And quite obviously, you determine taxable income WITHOUT factoring in any potential 20% deduction that we're discussing here.Q: Interesting. I'm married; so if I my taxable income is less than $315,000 -- and it is -- I get to just take a deduction of 20% of QBI and call it a day?A: That's it? Let's look at an example:A has QBI of $200,000 from an S corporation that paid a total of $30,000 of W-2 wages and that has no qualified property. A's spouse has $50,000 of W-2 income, and A and B have interest income of $20,000. Thus, total taxable income is $270,000.Normally, A's deduction would be limited to $15,000, the LESSER OF:1.20% of QBI of $200,000, or $40,000, or2.The GREATER OF:1.50% of W-2 wages of $30,000, or $15,000, or2.25% of $30,000 plus 2.5% of $0, or $7,500.3.While normally, A's deduction would be limited to $15,000, because A's taxable income is $270,000 -- which the last time I checked, is less than $315,000 -- the two limitations are disregarded, and A simply takes a deduction equal to 20% of QBI, or $40,000.Phase-In of W-2 LimitationsQ: That's great news. But you know where I'm heading with this, don't you? Next year I expect my S corporation to make more money, pushing me over $315,000 in taxable income. Now what? Do I have to deal with the W-2 limitations again?A: That, my friend, depends on how much you go over that $315,000 limit. This is where some math will be required.Section 199A(b)(3)(B) provides that once your taxable income exceeds the threshold ($315,000 if married filing jointly; $157,500 for everyone else), you have to start factoring in the W-2 limitations, but not all at once. Rather, the W-2 limitations will be "phased in" over the next $100,000 of taxable income (if you're married filing jointly, or $50,000 for everyone else).It's a multi-step process, but if you break it down piece by piece, it makes sense. Let's look at an example:A and B are married. A earns $300,000 from an S corporation. A's share of the W-2 wages paid by the S corporation is $40,000. A's share of the unadjusted basis of qualified property held by the S corporation is $0. B earns wages from her job, so that taxable income for A and B in 2018 is $375,000.How do we compute A's deduction?Step 1: We start by asking the following question: what would A's deduction have been if his taxable income was less than $315,000? This is simple: at that level of income, the W-2 limits wouldn't apply, and A would take a deduction of 20% of QBI of $300,000 or $60,000.Step 2: If A were given a $60,000 deduction because taxable income was less than $315,000, how big of a break would the law have been giving A compared to a situation where the W-2 limits applied in full? Stated another way, how does A's $60,000 deduction compare to what it WOULD have been if the W-2 limits did apply? If they applied, A's $60,000 deduction would have been limited to the GREATER OF:·50% of $40,000 or $20,000, or·25% of $40,000 plus 2.5% of $0, or $10,000.So if the W-2 limitations HAD applied, A would have been entitled to a deduction of only $20,000. This means that if taxable income had been $315,000 or less, the new law would have given A a break in the form of $40,000 of additional deduction ($60,000 - $20,000). This is known as the "excess amount" in Section 199A(b)(3)(A)(ii), but I just want you to think of it as the "get out of jail free" card the new law gives you when your taxable income is below the thresholds.Once your taxable income is above the threshold, however, you start to lose the benefit of that "get out of jail free" card, bit-by-bit, over the next $100,000 of taxable income ($50,000 if you're not married filing jointly). But by how much?Step 3: Look at it this way: A gets a TOTAL RANGE of $100,000 of taxable income -- from $315,000 to $415,000 -- before his $40,000 "get out of jail free" card is totally eliminated. So it makes sense that the $40,000 benefit should be reduced based on how far you are into that $100,000 range. It works like so: you start by determining by how much your taxable income exceeds your threshold:Taxable income:$375,000Less: threshold:($315,000 )Excess taxable income:$60,000A has gone $60,000 of the way through a $100,000 phase in range. Next, we put it into percentage terms. Here is how much of his "get out of jail free" card of $40,000 A should no longer be entitled to;Excess taxable income:$60,000Divided by: Total phase-in range$100,000Percentage of benefit A should lose:60%Step 4: A started with a benefit of $40,000: a $60,000 deduction when a $20,000 W-2 limit would have otherwise applied. Now that A has burned through 60% of that phase-in range, he should lose 60% of that $40,000 benefit, or $24,000. Thus, as a final step, we reduce A's $60,000 deduction by the amount of the "get out of jail free" card that he has lost because his income is too high:20% of QBI deduction:$60,000Reduction in $40,000 benefit because income is over $315,000:($24,000)Final deduction$36,000Thus, A is entitled to a deduction of only $36,000.To prove the system works, look what happens if taxable income was $415,000, but everything else remained the same:Step 1: Tentative deduction would still be $60,000Step 2: Excess amount -- think, "get out of jail free" card -- would still be $40,000 ($60,000 - $20,000)Step 3: Excess taxable income amount would now be $100,000 ($415,000 - $315,000) and thus the amount by which A has burned through the phase-in range would be 100% ($100,000/$100,000).Step 4: As a result, A must reduce his $40,000 "get out of jail free" card by 100%, or $40,000. This leaves him with a deduction of $20,000 ($60,000 - $40,000 reduction).Because A is left with a deduction of $20,000, the system works. Remember, $20,000 is the amount A would have been entitled to deduct if the W-2 limit had applied in full, which it should once taxable income hits $415,000. My work is done here.Q: That is pretty neat, but we're not done yet. Now that I understand these W-2 limits, I'm still a bit confused. What would prevent Mr. Big FANCYPANTS LAWYER from quitting his job as an employee, and having his $700,000 salary be paid into an S corporation he sets up. The S corporation can then pay him $200,000 in W-2 wages, and let the remaining $500,000 flow-through as income eligible for the 20% deduction. He wouldn't run into a W-2 limit problem, because 20% of $500,000 ($100,000) is not greater than 50% of W-2 wages ($100,000). Hasn't this lawyer just converted $500,000 of W-2 income into $400,000 of QBI?A: That's an exceedingly long question, but at least it shows that you're following along. Yes, at this point in the game, it looks like the lawyer can do that, but you have to understand something: NOT ALL BUSINESSES ARE ELIGIBLE FOR THE 20% DEDUCTION.Treatment of "Specified Service Trades or Businesses"Q: Wait...certain businesses can't take the deduction? Which ones?A: This, my friend, is likely to become one of the more prevalent --and impactful -- questions in all of the tax law over the coming years. It starts like so: Section 199A(d)(1) makes clear that there are two "trades or businesses" that are not eligible for the 20% of QBI deduction:1.Anyone who is in the business of being an employee (yes, being an employee is considered being in a business), and2.Any "specified service trade or business."Then, Section 199A(d)(2)(A) defines a "specified trade or business" in reference to Section 1202(e)(3)(A), which includes the following:"any trade or business involving the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees."Q: OK, I recognize most of those businesses. But now I must ask: why? What's the point of handpicking these businesses and saying, "NO DEDUCTION FOR YOU."A: While the businesses selected may seem arbitrary at first blush, they actually makes sense. In each business, the people who make up the business -- whether they be lawyers or accountants or doctors -- only offer clients or customers one thing: services. They don't sell goods. They don't build stuff. They simply provide services.And when viewed through that lens, it makes sense to eliminate these businesses from qualification for the 20% deduction. After all, when someone provides services, the payment they receive in return should be taxed as wages, or at least at the same rates as wages (i.e., ordinary income). So if you have an entire business that does nothing but provide services, it should follow that all of the income generated by the business should be taxed the same way wages would be taxed -- as ordinary income.Go back to the previous example about the lawyer. Lawyers provide services; that's it; that's all. So if you allow a lawyer to form an LLC to collect what was once wages, and then get a 20% deduction against that income, you have allowed a service provider to convert what would have been wages taxed at a top rate of 37% into tax-favored QBI taxed at an effective rate of 29.6%. And that ain't right.Looking at it from the opposite direction, if you own an S corporation or partnership that isn't engaged in a "specified service trade or business" -- like a fast-food restaurant -- then it follows that some of the income generated by the business isn't necessarily attributable to the skill and services of the employees and owners. Some of the revenue, rather, is generated from the highly efficient deep fryer. The alluring ambiance. The primal pleasure of consuming nearly a pound of fried beef in one sitting. So Congress can justify giving a special deduction -- and therefore a lower effective tax rate -- to these types of businesses because the argument can be made that some of the income allocated to the owners is not a return on the efforts of those owners and their employees, but rather on the capital the owners invested in the business to buy the equipment that in turn created part of the revenue.Q: You know...that does kind of make sense. So the owners of the following businesses get no deduction: accounting, law, health, archit...A: Stop right there. Section 199A modifies the definition of "specified service businesses" found in Section 1202 in a couple of important ways:·It removes architects and engineers from the businesses barred from taking the 20% deduction. Why? These types of businesses were eligible, in limited circumstances, for a Section 199 "manufacturer's deduction" before that provision was eliminated as part of the new law. This is because, unlike accountants and lawyers, architects and engineers are an integral part of actually, you know...building something. As an accountant, I create nothing, unless you could a 10,000 word missive on just one provision of the new tax law "something."·The definition of disqualified businesses for purposes of Section 199A ignores Sections 1202(e)(3)(B), which adds additional types of businesses to those in Section 1202(e)(3)(A) as the types of businesses barred from using Section 1202 (which we'll get into in a moment). Those types of businesses listed in (e)(3)(B), which are disqualified under Section 1202 but NOT under Section 199A, include:·banking,·insurance,·financing,·leasing,·investing,·farming,·any business giving rise to depletion,·any business of operating a hotel, motel, (Holiday Iiiin), or restaurant.·So at this point, those bulleted businesses ARE eligible for the 20% of QBI deduction. But then Section 199A(d)(2)(B) adds MORE businesses that don't qualify for the 20% deduction, namely, the business of investing and investing management, trading, or dealing in securities, partnership interests, or commodities. So now those businesses are back OUT of the Section 199A deduction.Q: So if I'm following you correctly, whether a business is a "specified service business" is going to be critical under the new law; after all, if you are a specified service business, you get no deduction. If you're not, 20% off the top, right?A: Yes, it's going to be VERY important. And here's the problem: despite the fact that Section 1202 was enacted in 1993, we have almost no available guidance from regulations, administrative rulings, or judicial precedent to help us determine what is and isn't a "service business" for purposes of Section 1202. Here's why:Section 1202 gives the holder of "qualified small business stock" an exclusion from gain upon the sale of such stock that has been held for longer than five years. Part of the requirements for qualifying as QSB stock is that the corporation can't be engaged in one of the service businesses described above in Sections 1202(e)(3)(A) and (e)(3)(B).Thus, one would think that with a 24-year history, the "service business" requirement of Section 1202 would be well-worn territory. But the reality is, taxpayers didn't care about or use Section 1202 until 2010. Why? For all QSB stock issued up to 2010, the exclusion from gain was only 50%, with the other 50% of gain taxed at 28%. This meant that sellers of QSB stock paid tax on the gain at an effective rate of 14%, and since most taxpayers pay tax on long-term capital gains at 15%, prior versions of Section 1202 only conferred a 1% benefit on taxpayers. Hence, the provision wasn't used a whole heck of a lot.Starting with stock issued in September of 2010, however, the exclusion of gain from QSB stock held more than 5 years increased to 100%. While this change makes the exclusion significantly more valuable, its relatively recent addition to the Code means that the new, improved version of Section 1202 didn't start to reap dividends to shareholders until September 2015. This, in turn, means that we're just about at the point where Section 1202 arguments should start showing up in the Tax Court. As a result, we may start seeing some debate about what constitutes a service business for purposes of Section 1202(e)(3)(A) -- and now, Section 199A -- and quite frankly, we're going to need it.The definitional debate has already gone crazy on the interwebs. For example: what do we do about an insurance business? Section 1202(e)(3)(B) included "insurance" among its disqualified businesses, but then Section 199A chose to link its definition of disqualified businesses only to Section 1202(e)(3)(A). Does this mean that insurance businesses are good to go under Section 199A?Maybe, but wait...what type of "insurance" business is Section 1202 referring to? The business of selling insurance, or the business of actually creating insurance package? I honestly have no idea, and I doubt many others do either. But we're going to have to find out.Q: That does sound like a bit of a problem. But for now, we should just assume that lawyers, doctors, accountants, etc... are out and can't get the deduction?A: You should know better than that. Nothing is that simple. Listen up: even if you're in one of those prohibited "specified service businesses," you can claim the 20% deduction, provided your taxable income is less than $315,000 (if you're married filing jointly, $157,500 for all other taxpayers).Q: Those are the same thresholds as the ones we used for the W-2 limitations, right? So does that mean the phase-in rule is the same, where the ability to take the deduction for owners of "specified service businesses" is eliminated over a span of $100,000 of taxable income for married taxpayers?A: You got it. But before we get into the phase-in rule for service businesses, let's just look at a couple of simple examples:Example 1: A is partner in a law firm. A is married, and has taxable income of $800,000. A's share of the income of the law firm is $700,000, his share of the W-2 wages of the law firm is $100,000, and his share of the unadjusted basis of the assets of the business is $20,000. A is entitled to no deduction, because a law firm is a specified service business and A's taxable income exceeds $415,000, meaning he is completely phased-out of any possible deduction.Example 2: Same as in Example 1, except A's taxable income is $300,000, his share of the income of the law firm LLC is $200,000, his share of the W-2 wages is $60,000, and his share of the assets of the LLC is $40,000. Even though A is a lawyer, he may take the deduction because his taxable income is below $315,000, the start of the phase-in threshold. As a result, A can take a deduction of 20% of $200,000, or $40,000.Q: But wait...in Example 2, 50% of A's share of the W-2 wages of the law firm is only $30,000. Shouldn't his $40,000 deduction be limited to $30,000 under the first W-2 limitation?A: Great catch, but as is usually the case, you're wrong. Remember, when taxable income is less than $315,000, the W-2 limitations don't apply. As a result, A is entitled to the full $40,000 deduction.Phase-Out of Deduction for Specified Service BusinessesQ: I follow those examples, but I'm almost afraid to ask: what happens to a lawyer, doctor, accountant, etc...if taxable income starts to exceed $315,000 for a married couple?A: Yeah, I wish we could skip that whole thing, but this is where the magic happens. Just like with the W-2 limitation, the "get out of jail free" card Congress gives owners of specified service businesses -- the ability to take the 20% deduction -- starts to disappear once taxable income exceeds $315,000 for married taxpayers ($157,500 for everyone else), and is completely gone by the time taxable income hits $415,000 ($207,500).To illustrate, assume the following example. It should seem familiar, as it was the same fact pattern we used before for a non-specified service business.A and B are married. A earns $300,000 from an S corporation. A's share of the W-2 wages paid by the S corporation is $40,000. A's share of the unadjusted basis of qualified property held by the S corporation is $0. B earns wages from her job, so that taxable income for A and B in 2018 is $375,000. This time, A is a lawyer, so his $300,000 of income from his S corporation is from a disqualified "specified service business."Step 1: We start by determining what A's deduction would have been if his taxable income had been less than $315,000. This is determined by taking the LESSER OF:1.20% of QBI of $300,000, or $60,000, or2.the GREATER OF:·50% of W-2 wages of $40,000, or $20,000, or·25% of $W-2 wages of $40,000 + 2.5% of basis of property of $0, or $10,000.But wait...don't forget that if taxable income is less than $315,000, not only does A get to take the deduction despite being a lawyer, in addition, the W-2 limits don't apply at that level of income. Thus, while A would generally be entitled to a deduction of only $20,000 in this case, had taxable income been $315,000 or less, he would have gotten the full $60,000.Because taxable income is greater than $315,000, however, we must now determine how much of that $60,000 deduction A has to give up.Step 2: We begin by figuring out, once again, how much of his $100,000 "phase-in" threshold A has exceeded, although now it's probably more accurately described as a "phase-out" threshold. The math looks the same as before:Taxable income:$375,000Less: threshold:($315,000 )Excess taxable income:$60,000A has gone $60,000 of the way through a $100,000 phase-in range. Putting this into percentage terms, here is how much of the benefit A should lose:Excess taxable income:$60,000Divided by: Total phase-in range$100,000Percentage:60%Step 3: Thus, A should lose 60% of his benefit. Section 199A(d)(3)(B) accomplishes this by requiring A to compute his "applicable percentage," which is simply 100% - the percentage from Step 2:Starting Percentage100%Less: percentage from Step 2:(60%)Applicable percentage40%Now that we've determined the applicable percentage, A is only entitled to take into consideration, in computing his deduction, the applicable percentage of his allocable share of QBI, W-2 wages, and basis of assets. Like so:Allocable ShareApplicable % (40%)QBI$300,000$120,000W-2 Wages$40,000$16,000Basis of Assets$0$0Next, we determine A's deduction under the general rules using these new numbers:Step 4: A's deduction is equal to the LESSER OF:1.20% of QBI of $120,000, or $24,000,2.or the GREATER OF:·50% of W-2 wages of $16,000, or $8,000, or·25% of W-2 wages of $16,000 , or $4,000, plus 2.5% of basis, or $0, for a total of $4,000.Thus, A's tentative deduction is $8,000. BUT DON'T FORGET...the W-2 limit doesn't apply if taxable income is less than $315,000, and is phased in as income goes from $315,000 to $415,000. So believe it or not, we now have to jump through those hoops as well. On to Step 5, which starts by figuring out the "get out of jail free" card the new law would have given A if the W-2 limit didn't apply at all:Step 5: The "get out of jail free" card is the excess of the deduction allowed to A in the absence of a W-2 limit over what the deduction would be if the limit applied in full force. Thus, it is $16,000 ($24,000-$8,000).Next, we have to reduce that excess benefit based on how much A's taxable income exceeds $315,000.Step 6: A gets a TOTAL RANGE of $100,000 of taxable income -- from $315,000 to $415,000 -- before his $16,000 "get out of jail free" card is totally eliminated. So it makes sense that the $16,000 benefit should be reduced based on how far A is into that $100,000 range.Taxable income:$375,000Less: threshold:($315,000 )Excess taxable income:$60,000A has gone $60,000 of the way through a $100,000 phase-in range. Putting this into percentage terms, here is how much of his "get out of jail free" card of $16,000 A should no longer be entitled to;Excess taxable income:$60,000Divided by: Total phase-in range$100,000Percentage of benefit A should lose:60%Step 7: A started with a benefit of $16,000: a $24,000 deduction when a $8,000 W-2 limit would have otherwise applied. Now that A has burned through 60% of that phase-in range, he should lose 60% of that $16,000 benefit, or $9,600. Thus, as a final step, we reduce A's $24,000 deduction by the amount of the "get out of jail free" card that he has lost because his income is too high:20% of QBI deduction:$24,000Reduction in $24,000 benefit because income is over $315,000:($9,600)Final deduction$14,400A's final deduction is $14,400. Once again, we know the system works, because if A's taxable income had been $415,000 or greater, his "applicable percentage" in Steps 2 and 3 would have been $0.Taxable income:$415,000Less: threshold:($315,000 )Excess taxable income:$100,000Then, the percentages:Excess taxable income:$100,000Divided by: Total phase-in range$100,000Percentage:100%Starting Percentage100%Less: percentage from Step 2:(100%)Applicable percentage0%Finally, we take his applicable percentage of QBI and wages:Allocable ShareApplicable % (40%)QBI$300,000$0W-2 Wages$40,000$0Basis of Assets$0$0Since QBI and W-2 wages are reduced to zero, A gets no deduction, which he shouldn't once taxable income exceeds $415,000.Q: Let's put this all together: You said the W-2 limits are in place so that people can't convert wages into tax-favored QBI. Then, you said that certain service businesses can't use the deduction at all. But then you said that the W-2 limits don't apply AND service businesses can use the deduction when taxable income is less than $315,000 for married taxpayers ($157,500) for all others. So what is stopping an accountant who gets $300,000 in wages from setting up an S corporation as you mentioned, having the $300,000 paid to the S corporation, paying NO wages out of the S corporation, and converting $300,000 of wage income into $240,000 of QBI?A: First of all, congratulations on your applied knowledge. Impressive. But this is where the inconsistencies of the current law take hold. Theoretically, you could form an S corporation to do exactly what you just proposed, but there's one issue: S corporations are required to pay wages to any shareholder who is also an officer and provides "significant services" to the corporation. This "reasonable compensation" standard has been around for decades, because Revenue Ruling 59-221 provides that S corporation flow-through income is NOT subject to self-employment tax. As a result, ever since 1959, S corporation shareholders have had tremendous motivation to forego compensation in exchange for distributions in order to save on payroll taxes. The IRS, of course, wants to collect its share of payroll taxes, so it will frequently attack S corporation shareholders who withdraw no wages but take substantial distributions, forcing them to reclassify a portion of distributions to salary and pay the corresponding payroll taxes.And as you may have noticed, way up above, we said that QBI does NOT include "reasonable compensation" paid to the shareholder. This means that even if an accountant DID set up an S corporation to take $300,000 of what were once wages and pass them through as QBI, even though according to Section 199A this would fly, the IRS could come in and say that some or all of the $300,000 is reasonable compensation, which is NOT treated as QBI. So, for example, if the IRS reclassified $120,000 of the S corporation's income as reasonable compensation, only $180,000 of the S corporation's income would be eligible for the QBI treatment.The same risk, however, does not exist with partnerships, because: 1. partnerships cannot pay wages to partners, only guaranteed payments, and 2. There is generally no "reasonable compensation" standard for partnerships, because partnership income is usually subject to self-employment tax. Therefore, a partner has nothing to gain by foregoing guaranteed payments in exchange for an increased share of flow-through income, because there would be no payroll tax savings.Thus, it follows, an accountant or attorney COULD set up an LLC, rather than an S corporation, and convert up to $315,000 of wages into QBI. Of course, over time, the IRS could seek to establish the same type of reasonable compensation standard for partnerships that currently exists for S corporations, minimizing or closing this potential loophole.Q: So if I'm following you, setting up an LLC could be a loophole. Until it's not. Got it. Anything else I should know?A: A few things, yes. Let's take a look.Ancillary IssuesQ: We figured out how to compute the 20% deduction. But where do we actually take it?A: This is an interesting one: the deduction will NOT be on Page 1 -- as a deduction in computing adjusted gross income -- nor will it be an "itemized deduction" deducted on Schedule A and only available to those who itemize. Rather, it looks like the deduction will take its place on the top of Page 2 as a deduction available to all taxpayers, similar to the standard deduction or personal exemptions.Q: Does it reduce a taxpayer's self employment income?A: I don't see how it could, since, as discussed immediately above, it will show up as a deduction on Page 2 of the Form 1040.Q: What about the individual alternative minimum tax? Can you take the 20% of QBI deduction against AMT taxable income?A: Based on my reading, you certainly can. Section 199A(f)(2) provdes that when computing alternative minimum taxable income, you determine qualified business income" without taking into consideration any AMT adjustments or preferences as provided in Sections 55 -59. To me, this simply means that QBI is the same for AMT as it is for regular tax, and thus, the 20% deduction is computed the same way. And since the determination of alternative minimum taxable income starts with taxable income, and the amended Code provides no specific add-back to AMTI for the 20% deduction, I say we're good to go.Q: Let's say my sole proprietorship, S corporation, or partnership generates a loss. There would obviously be no 20% deduction -- since there's no income -- but what happens to that loss in the next year if there is QBI in the following year?A: It appears that when you have a loss in Year 1 from a QBI-type activity, even if that loss is used in computing taxable income in Year 1 -- when you get to Year 2, that QBI loss "carries over" and reduces Year 2 QBI solely for purposes of computing the 20% of QBI deduction. To illustrate:A owns 50% of an S corporation. In 2018, the S corporation allocates a $100,000 loss to A. Because A materially participates in the S corporation, he is able to use the $100,000 loss in full to offset his wife's $200,000 of wages.In 2019, the S corporation allocates $200,000 of income to A. While A would generally start the process of determining his Section 199A deduction by taking 20% of $200,000, Section 199A(b)(6) provides that in determining A's QBI deduction for 2019, the $200,000 of income must be reduced by the $100,000 of loss from 2018. Thus, while A will still include the full $200,000 of S corporation income in his taxable income in 2019, his deduction will be limited to $20,000 (20% * $100,000) rather than $40,000 (20% * $200,000).Q: What if I have a Section 199A deduction in a year I have a net operating loss? Does the deduction add to my NOL?A: Nope. Section 172(d) has been amended to provide that a net operating loss does NOT include the Section 199A deduction.Q: That is interesting. Any other weird rules/limitations I should know about?A: Yes. Let's come full circle to where we started and remember that it's not just enough to determine the deduction subject to the rules described above. Once you've navigated the specified service business rules, the W-2 and adjusted basis limitations, and the phase-ins and phase-outs, you have to remember that there is also an overall limitation based on taxable income.About 10,000 words, ago, we laid out the first rule of Section 199A. Under Section 199A(1)(a), once you've determined the 20% deduction, you've got to deal with an overall limitation, where the deduction is equal to the LESSER OF:·the combined "qualified business income" of the taxpayer, or·20% of the excess of taxable income minus the sum of any net capital gainRemember, the combined qualified business income is the 20% deduction we determined above, PLUS qualified REIT dividends PLUS income from a publicly traded partnership. But we can ignore those latter two items for our purposes; I'd prefer to look at the second element of the limitation, where the deduction is limited to 20% of the excess of taxable income over net capital gain. When will this limitation matter? Consider the following example:A has $100,000 of QBI. In addition, A has $200,000 of long-term capital gains, $20,000 of wages, and $50,000 of itemized deductions, for taxable income of $270,000. A's deduction is limited to the lesser of:·20% of QBI of $100,000, or $20,000, or·20% of ($270,000-$200,000), or $14,000.Thus, A's deduction is limited to $14,000. Why? Because while A has taxable income of $270,000 -- including $100,000 of QBI -- $200,000 of that taxable income will be taxed at favorable long-term capital gains rates. Thus, there is only $70,000 to be taxed at ordinary rates, meaning the 20% deduction should be limited to $70,000 of income; after all, you don't want to give a 20% deduction against income that's already taxed at a top rate of 23.8%!Q: You've outdone yourself today. But since all of this law is brand new, there's really no way for me to check your math. How do I know you're right?A: That's kind of the point. With no regulations, no form instructions, and most unfortunate of all, no one who helped craft the bill or vote on the thing who actually understands what it says, it may be a while before clarify is forthcoming. So for now, I"m all ya' got.

What is the typical eviction process (forms and time frames) for residential?What kind of eviction? There are different types. Each has its own forms, timelines, and requirements.Here in Las Vegas, this is how it looks:Eviction Process​​​UNDERSTANDING THE EVICTION PROCESSPlease note it is your responsibility to determine the correct notice type based on your individual circumstances. Our office cannot give legal advice or complete paperwork for you.EVICTIONSAll evictions must begin with a NOTICE. There are several types of notices to choose from. You may not always be able to use the quickest notice available. You must choose one that applies to your specific situation. There are separate notices and processes for manufactured homes and non-manufactured homes. An eviction may cost $200 or more from start to finish, depending on the circumstances. Evictions may take anywhere from 10 to 180 days, depending on the circumstances of the case. You may use the Constable's Office or a licensed process server.Nevada Revised Statute 118A.390 makes it illegal for a landlord to use "self-help evictions" to carry out an eviction. For example, a landlord cannot change out a tenant's locks without the involvement of the Court, the Sheriff, or Constable. A landlord cannot try to force the tenant off the property by making living conditions "unbearable".FORECLOSURESPursuant to NRS 40.255, evictions following the foreclosure of residential property have special procedural requirements. The Constable's office may not provide legal advice on this process. Forms for post-foreclosure cases may be obtained at the Civil Law Self Help Center or through an attorney. The summary eviction process is NOT authorized to evict the former owner of the property or the tenant of the former owner of the property. To ensure you are following these specific statutory requirements it is recommended you seek the advice of an attorney in carrying out this type of eviction.GENERAL INFORMATION FOR NOTICESThe numbers of days listed for each of these notices are BUSINESS days and not calendar days. Please note that the day of service does not count as one of the days.Example (7 day pay or quit): You come to the Constable's Office on Thursday (4/8/13). We serve the paper on Friday (4/9/13). Tenant has Monday and Tuesday (4/12/13 thru 4/20/13) of the following week to file an answer to the notice. You return to our office on Wednesday (4/21/13) to continue the eviction process. The actual return date will be printed on your receipt given to you by our office. You may return to our office after the posting of the notice to pick up the notice, but you cannot file it with the court until the appropriate number of days has passed or you may have to start the process over again.The Civil Law Self-Help Center website is a wealth of knowledge for those who need assistance or guidance in the process. All forms, and explanations of what to expect in each process, are available on their website. A brief synopsis of the different notices is included below for your convenience, and each excerpt taken directly from their website in March of 2015. Information is subject to change as Nevada Revised Statutes change.Forms for the formal eviction process for manufactured (mobile) homes are available from the Nevada Supreme Court Law Library website.The Civil Law Self Help Center offers flowcharts on their website that provide a comprehensive overview of the process that may be helpful to you.YOU MUST USE CARE TO ENSURE YOUR CIRCUMSTANCES MEET THE CRITERIA FOR THE SPECIFIC TYPE OF NOTICE YOU ARE REQUESTING. YOUR FAILURE TO DO SO MAY RESULT IN THE COURT REJECTING YOUR NOTICE AND CASE. IF YOUR CASE IS REJECTED BY THE COURT YOU MUST START THE PROCESS OVER AGAIN. ​THE NOTICE INFORMATION PRESENTED BELOW IS FROM THE CIVIL LAW SELF-HELP CENTER PUBLIC WEBSITE​. IT IS PROVIDED FOR YOUR CONVENIENCE AND IS NOT LEGAL ADVICE ON HOW TO PROCEED WITH YOUR CASE. IF YOU ARE NOT SURE OF WHAT NOTICE TO USE, YOU SHOULD CONSULT AN ATTORNEY.7-DAY NOTICE TO PAY OR QUIT:Nevada Revised Statutes require a seven-day notice to the tenant, instructing the tenant to either pay the rent or "quit" (leave) the rental property. To evict a tenant for nonpayment of rent, the landlord must "serve" (deliver) a Seven-Day Notice to Pay Rent or Quit to the tenant. (NRS 40.253(1)(a).)After service, a landlord cannot refuse to accept the tenant's rent. Rent includes late fees, but a summary eviction cannot be ordered for things like court costs, collection fees, attorney fees, and the like. (NRS 118A.150, NRS 188A.220(1)c.)TENANCY-AT-WILL NOTICES:Nevada law requires a five-day notice to the tenant, informing the tenant that the tenancy-at-will is ending and instructing the tenant to leave, followed by a second five-day Notice to Quit for Unlawful Detainer (after the first notice period has elapsed) that tells the tenant to leave because the tenant's presence is now unlawful.What, exactly, is a "tenancy-at-will"?A "tenancy-at-will" is the type of tenancy that exists when the tenant (known as the "tenant-at-will") occupies the premises with the consent of the landlord (either express or implied) for an indefinite period of time with no periodic rent paid or reserved, where the tenancy can be terminated at any time at the will of either party. (See Baker v. Simonds, 79 Nev. 434, 386 P.2d 86 (1963); 49 Am. Jur. 2d, Landlord and Tenant § 118.)An example of a tenancy-at-will might be where a homeowner allows a guest to stay with the homeowner without paying rent. The guest enters the property with the owner's permission. The guest can leave at any time, and the owner can ask the guest to leave at any time. In other words, either party can terminate the tenancy at their will.​​​NO CAUSE NOTICES:Nevada law requires a thirty-day notice to the tenant (or a seven-day notice if the tenant pays rent weekly), followed by a second five-day Notice to Quit for Unlawful Detainer (after the first notice period has elapsed) instructing the tenant to leave because tenant's presence is now unlawful.When can a landlord use a "no cause" eviction notice?A landlord can use a "no cause" notice ONLY after the tenant's lease has expired or if there is no lease agreement. (NRS 40.251(1)(b)(1).)Use if rent is paid. Does not apply if no rent is paid, see Tenancy at Will.Must the landlord give the tenant an additional thirty days on the property if the tenant asks for it?Only if the tenant is sixty years old or older or has a physical or mental disability, requests the additional time in writing, and provides documentation proving tenant's age (such as a driver's license) or disability (such as a social security award letter). (NRS 40.251(2).)If the tenant requests the additional thirty days and the landlord refuses, the tenant can file a motion with the court to get the additional time. The court can enter an order allowing the tenant to stay on the rental property for an additional thirty days after the initial thirty-day notice expires (see "Responding to the Notice" above). (NRS 40.251(4).)If the landlord allows the tenant to stay on the property for an additional thirty days (or if the court issues an order allowing the tenant to stay), does the tenant have to pay rent during that time?Unless the court orders something else, the landlord and tenant will continue to have the same rights and obligations that they had before the additional thirty-day period was granted, including any obligations regarding payment of rent. (NRS 118A.310.)If the tenant fails to pay rent, the landlord could serve the tenant with a Seven-Day Notice to Pay Rent or Quit and start an eviction based upon tenant's nonpayment (unless the court has made some order changing tenant's payment obligation).NOTICES FOR NUISANCE, WASTE, ASSIGNING/SUBLETTING, UNLAWFUL BUSINESS, or DRUG VIOLATION:Nevada law requires a three-day notice to the tenant that describes the alleged nuisance, waste, improper assignment/sublet, unlawful business, or illegal drug use, followed by a second five-day Notice to Quit for Unlawful Detainer (after the first notice period has elapsed) instructing the tenant to leave because tenant's possession is now unlawful.The three-day notice can be used where the tenant is:Committing or permitting a "nuisance" on the rental property;Assigning or subletting the rental property in violation of the lease;Committing or permitting "waste" (damage or destruction) on the rental property;Setting up or carrying on any unlawful business on the rental property; orViolating a controlled substance law in NRS 453.011 to 453.552 (except NRS 453.336).What does "nuisance" mean?A "nuisance" is "conduct or an ongoing condition which constitutes an unreasonable obstruction to the free use of property and causes injury and damage to other tenants or occupants of that property or adjacent buildings or structures." (NRS 40.2514(4).)A tenant can also be evicted for certain drug-related activity (specifically, for any violation of the controlled substance laws in NRS 453.011 to 453.552, except NRS 453.336), even though the activity does not meet the definition of "nuisance."When can a tenant be evicted for assigning or subletting?If the lease says the tenant cannot assign the tenant's interest in the tenancy or sublet the rental property, the landlord can seek an eviction. However, a landlord cannot unreasonably withhold consent to a tenant's request to assign or sublet the property.What is an "unlawful business"?"Unlawful business" is not defined in the statute (NRS 40.2514), but the term probably means some type of business that is prohibited or strictly regulated under Nevada law. (See Gasser v. Jet Craft Ltd., 87 Nev. 376, 487 P.2d 346 (1971).)It is possible that operating a lawful business might violate a tenant's lease. But the landlord would probably need to evict the tenant based upon the lease violation (NRS 40.2516), not a nuisance.When is a tenant "committing or permitting waste" on the property?"Waste" is generally some harmful or destructive use of the property by someone in rightful possession that decreases the property's value. "Committing waste" means that a person is doing something or taking some action that is causing harm to the property. "Permitting waste" means that a person is failing to prevent or affirmatively allowing harm to the property.LEASE VIOLATION NOTICES:Nevada law requires a five-day-notice to the tenant that describes the lease violation and directs the tenant to either "cure" (fix) the violation or leave, followed by a second five-day Notice to Quit for Unlawful Detainer (after the first notice period has elapsed) instructing the tenant to vacate because their possession is now unlawful.Can the tenant "cure" (correct) the lease violation in order to avoid an eviction?After the tenant receives the Five-Day Notice to Perform Lease Condition or Quit, the tenant can "cure" the lease violation (in other words, perform the lease condition or correct the lease violation), assuming the lease violation is something that can be performed or corrected, in order to stay on the rental property.From the date the notice is served, the tenant has only three judicial (business) days to "cure" (correct) the lease violation. (NRS 40.2516.) After the tenant fixes the problem, the tenant should give written notice to the landlord that the lease violation has been cured.​4 DAY NOTICE TO SURRENDER (UNLAWFUL OCCUPANTS/SQUATTERS)This section does not apply if there has ever been a landlord-tenant relationship between the parties!An owner can move forward with the removal of an unlawful, unauthorized occupant through a civil process, whether or not an arrest has been made. If the owner decides to move forward with removal of the unlawful or unauthorized occupant, the owner can serve one notice on the occupant. Nevada law requires a 4-day notice to the occupant, instructing the occupant to surrender (leave) the property.ALL NOTICES ARE SERVED/POSTED THE NEXT BUSINESS DAYWhat happens next?Our office will serve the notice. You will return on the date printed on your receipt to continue with the eviction process. When you return to our office, you will be handed the actual notice and instructed to take it to Justice Court to file the Complaint for the Summary Eviction. The Justice Court requires that their paperwork be typed and their filing fee is $71.00.After filing with the court:If no answer was filed by the tenant, a Complaint for Summary Eviction must be filed. After judicial review an Eviction Order may be granted and sent to our office. You will be given an "Instructions to Constable" form and directed to return to our office to pay the lock-out fee.If a timely Answer was filed by the tenant, both the landlord and tenant will receive a court date scheduled by the Justice Court. A hearing will be held to determine the next course of action.If an Eviction Order is eventually granted, and you did not receive an "Instructions to Constable" form, you will need to get this from the Court prior to coming to our office to pay the lock-out fee. We cannot process your eviction without receiving the "Instructions to Constable" form and the appropriate lock out-fee.Motion to Stay or Motion to Set Aside the Eviction OrderIf the tenant files a Motion to Stay or a Motion to Set Aside the Eviction Order, please note the Justice Court does not contact the landlord to notify them. While the tenant is responsible for serving the motion, it is up to the landlord to search the Justice Court Public Access site to see if the tenant contested the eviction notice. If a Motion is filed, the judge will render a decision on the Motion or decide a hearing is necessary.The landlord will need to check the status of any Motion on the Justice Court Public Access website to see what decision the Judge has rendered. In the case of a hearing being ordered, both the landlord and tenant will be notified to appear in Court. Please note that we cannot complete an eviction if it has been ordered stayed. The tenant may also contest a denial by appealing to the District Court.After our office receives the Eviction Order/Day of Lockout:Once we receive the order from court, the eviction notice will be posted the next business day and we will lockout the property the following business day. The new law requires the Constable to post the eviction order on the door within 24 hours after receiving the order from the court. Then, the actual lockout has to happen between 24 and 36 hours after the posting of the order. The biggest effect this may have, for example, when a notice is posted at 3 p.m. on a Monday afternoon the lockout cannot happen before 3 p.m. on Tuesday. On the day of the lockout, the deputy will contact you no later than 11:00 am to schedule the lock change. If you are hiring a locksmith, you must have them ready to change the locks at the scheduled time to avoid cancellation of the lockout. If you are changing your own locks, you must have your locks ready and be prepared to change the locks.If you do not have a key to the property or are unsure of how you will be entering the property on the day of the lock change, please contact a locksmith before your scheduled time to avoid cancellation. If you need assistance in contacting a locksmith, our deputies or office can assist in doing so. The deputy will contact you between 8 a.m. and 11 a.m. the day of the scheduled lockout to set up a time to meet.If we are unable to contact you of if your eviction is rescheduled due to you not being ready to complete the eviction, you may be required to pay up to an additional one-half of the original fee for the eviction to be completed. If you do not comply with meeting our deputy to carry out the order, it will be cancelled and the court will be notified of the cancellation. If a delay occurs due to a mutually agreed upon reason, or due to a reason beyond our control, you will be contacted and notified, and will not be charged an additional fee when the order is completed.Prior to the completion of the eviction, our deputy will walk the property and ensure it is secured. Locks must be changed at the time our deputy affixes a seal on the door to the premises. This is not an option when we perform an eviction and lock-out. Our deputy must witness and verify the lock is changed and may only apply the seal themselves when the eviction is completed.Always use good judgment and wait for the Deputy to arrive before approaching the residence and having contact with the tenant being evicted. If you are aware of any threats toward you, toward law enforcement, or any factors that could pose a risk to someone's safety, please notify them when confirming the appointment so additional deputies or the LVMPD can be requested to respond and assist in keeping the peace.Evictions can be volatile events and it is critical for your safety, and for the safety of our deputies, that you share any known threats, weapons at the location, or other information you have that could pose a hazard. ALWAYS wait for the deputy to arrive before approaching the residence.​Accepting Payment after an Eviction Order is grantedOnce an eviction is ordered, the tenant may not avoid the eviction by making payment on the delinquent rent. If the landlord wishes to cancel the eviction by accepting payment from the tenant before the lockout, the landlord must obtain an order from the court rescinding the eviction order. This can only be done by filing a Motion to Rescind with the Justice Court. If our deputy is at the location and we have not received an order to rescind the eviction, we MUST carry out the eviction as directed by the Court. Failure to comply or meet the deputy will be considered a cancellation and you will not receive a refund.Motion to Rescind Order for Summary EvictionThe Motion to Rescind must be filed in Justice Court. Once an Order to Rescind is issued, it must be brought to the Constable's Office for the lockout fee refund. Order must be in this office the day before action is to be taken or the Constable's Office will be unable to refund. If posting has already been done and you file an order to rescind the day before lockout, only one-half of the refund will be issued (8-12 weeks for refund).After Eviction Is CompleteThe new law affords a procedure for tenants who have been locked out or evicted and are being denied reentry to retrieve essential personal items. The tenant has to file a motion within 5 days of the lockout or eviction, and then a hearing gets set within 5 days of filing. The court sets a hearing date, then orders the Constable to serve the notice of hearing on the landlord. After the court sets a hearing date, the statute says the court will "order a copy served upon the landlord by the Sheriff/Constable, or process server."When an eviction is complete, Nevada Revised Statute 118.460(1) requires the landlord to safeguard the former tenant's property for thirty days. It does not need to remain in the unit, and may be inventoried, moved, and stored elsewhere. The landlord may also charge and collect reasonable and actual costs incurred for that inventory, moving, and storage prior to releasing the property to the former tenant. NRS 118A.520 restricts what may or may not be charged for the property.NEW LAWS PERTAINING TO UNAUTHORIZED OCCUPANTS (SQUATTERS)New laws pertaining to unauthorized occupants ("squatters") will go into effect on October 1st, 2015. The Office of the Ex-Officio Constable does not handle criminal enforcement with respect to squatters. To request assistance, please contact the Las Vegas Metropolitan Police Department non-emergency number at 3-1-1 to request assistance. Only use 9-1-1 if an emergency exists. If an arrest is not made in your matter due to the need to investigate further, you may still pursue the new process of "Removal". It is not an eviction.The new notice form is a "Notice to Surrender" and it is a 4-Day Notice. We can handle posting these notices for you or you can do them yourself. Forms and information are available from the Civil Law Self Help Center or on their website, under "Removals".If a Removal is ordered by the Justice Court, our office will handle those removals in the same manner as an immediate eviction. We will not give a 24 hour notice of removal and we will handle those orders the next business day after they are received by our office and the appropriate fees are paid.After reading the above information, if you are still unsure how to proceed, you should contact an attorney for legal advice and direction in how to pursue your case as our office cannot provide such advice.

Donald Trump, in full Donald John Trump, (born June 14, 1946, New York, New York, U.S.), 45th president of the United States (2017–21). Trump was a real-estate developer and businessman who owned, managed, or licensed his name to several hotels, casinos, golf courses, resorts, and residential properties in the New York City area and around the world. From the 1980s Trump also lent his name to scores of retail ventures—including branded lines of clothing, cologne, food, and furniture—and toTrump University, which offered seminars in real-estate education from 2005 to 2010. In the early 21st century his private conglomerate, theTrump Organization, comprised some 500 companies involved in a wide range of businesses, including hotels and resorts, residential properties, merchandise, and entertainment and television. Trump was the third president in U.S. history (after Andrew Johnson in 1868 and Bill Clinton in 1998) to be impeached by the U.S. House of Representatives and the only president to be impeached twice—once (in 2019) for abuse of power and obstruction of Congress in connection with the Ukraine scandal (he was acquitted of those charges by the U.S. Senate in 2020) and once (in 2021) for “incitement of insurrection” in connection with the storming of the United States Capitol by a violent mob of Trump supporters as Congress met in joint session to ceremonially count electoral college votes from the 2020 presidential election. Trump lost that election to former vice president Joe Biden by 306 electoral votes to 232; he lost the popular vote by more than seven million votes.Trump was the fourth of five children ofFrederick (Fred) Christ Trump, a successful real estate developer, and Mary MacLeod. Donald’s eldest sister, Maryanne Trump Barry, eventually served as a U.S. district court judge (1983–99) and later as a judge on the U.S. Court of Appeals for the Third Circuit until her retirement in 2011. His elder brother, Frederick, Jr. (Freddy), worked briefly for his father’s business before becoming an airline pilot in the 1960s. Freddy’s alcoholism led to his early death in 1981, at the age of 43.Beginning in the late 1920s, Fred Trump built hundreds of single-family houses and rowhouses in the Queens and Brooklyn boroughs of New York City, and from the late 1940s he built thousands of apartment units, mostly in Brooklyn, using federal loan guarantees designed to stimulate the construction of affordable housing. During World War II he also built federally backed housing for naval personnel and shipyard workers in Virginia and Pennsylvania. In 1954 Fred was investigated by the Senate Banking Committee for allegedly abusing the loan-guarantee program by deliberately overestimating the costs of his construction projects to secure larger loans from commercial banks, enabling him to keep the difference between the loan amounts and his actual construction costs. In testimony before the Senate committee in 1954, Fred admitted that he had built the Beach Haven apartment complex in Brooklyn for $3.7 million less than the amount of his government-insured loan. Although he was not charged with any crime, he was thereafter unable to obtain federal loan guarantees. A decade later a New York state investigation found that Fred had used his profit on a state-insured construction loan to build a shopping centre that was entirely his own property. He eventually returned $1.2 million to the state but was thereafter unable to obtain state loan guarantees for residential projects in the Coney Island area of Brooklyn.Donald Trump attended New York Military Academy (1959–64), a private boarding school; Fordham University in the Bronx (1964–66); and the University of Pennsylvania’s Wharton School of Finance and Commerce (1966–68), where he graduated with a bachelor’s degree in economics. In 1968, during the Vietnam War, he secured a diagnosis of bone spurs, which qualified him for a medical exemption from the military draft (he had earlier received four draft deferments for education). Upon his graduation Trump began working full-time for his father’s business, helping to manage its holdings of rental housing, then estimated at between 10,000 and 22,000 units. In 1974 he became president of a conglomeration of Trump-owned corporations and partnerships, which he later named the Trump Organization.During the 1960s and early 1970s, Trump-owned housing developments in New York City, Cincinnati, Ohio, and Norfolk, Virginia, were the target of several complaints of racial discrimination against African Americans and other minority groups. In 1973 Fred and Donald Trump, along with their company, were sued by the U.S. Department of Justice (DOJ) for allegedly violating the Fair Housing Act (1968) in the operation of 39 apartment buildings in New York City. The Trumps initially countersued the Justice Department for $100 million, alleging harm to their reputations. The suit was settled two years later under an agreement that did not require the Trumps to admit guilt.In the late 1970s and the 1980s, Donald Trump greatly expanded his father’s business by investing in luxury hotels and residential properties and by shifting its geographic focus to Manhattan and later to Atlantic City, New Jersey. In doing so, he relied heavily on loans, gifts, and other financial assistance from his father, as well as on his father’s political connections in New York City. In 1976 he purchased the decrepit Commodore Hotel near Grand Central Station under a complex profit-sharing agreement with the city that included a 40-year property tax abatement, the first such tax break granted to a commercial property in New York City. Relying on a construction loan guaranteed by his father and the Hyatt Corporation, which became a partner in the project, Trump refurbished the building and reopened it in 1980 as the 1,400-room Grand Hyatt Hotel. In 1983 he openedTrump Tower, an office, retail, and residential complex constructed in partnership with the Equitable Life Assurance Company. The 58-story building on 56th Street and Fifth Avenue eventually contained Trump’s Manhattan residence and the headquarters of the Trump Organization. Other Manhattan properties developed by Trump during the 1980s included the Trump Plaza residential cooperative (1984), the Trump Parc luxury condominium complex (1986), and the 19-story Plaza Hotel (1988), a historic landmark for which Trump paid more than $400 million.In the 1980s Trump invested heavily in the casino business in Atlantic City, where his properties eventually included Harrah’s at Trump Plaza (1984, later renamed Trump Plaza), Trump’s Castle Casino Resort (1985), and the Trump Taj Mahal (1990), then the largest casino in the world. During that period Trump also purchased the New Jersey Generals, a team in the short-lived U.S. Football League; Mar-a-Lago, a 118-room mansion in Palm Beach, Florida, built in the 1920s by the cereal heiress Marjorie Merriweather Post; a 282-foot yacht, then the world’s second largest, which he named the Donald Trump Princess; and an East Coast air-shuttle service, which he called Trump Shuttle.In 1977 Trump married Ivana Zelníčková Winklmayr, a Czech model, with whom he had three children—Donald, Jr., Ivanka, and Eric—before the couple divorced in 1992. Their married life, as well as Trump’s business affairs, were a staple of the tabloid press in New York City during the 1980s. Trump married the American actress Marla Maples after she gave birth to Trump’s fourth child, Tiffany, in 1993. Their marriage ended in divorce in 1999. In 2005 Trump married the Slovene model Melania Knauss, and their son, Barron, was born the following year.Melania Trump became only the second foreign-born first lady of the United States upon Trump’s inauguration as president in 2017.When the U.S. economy fell into recession in 1990, many of Trump’s businesses suffered, and he soon had trouble making payments on his approximately $5 billion debt, some $900 million of which he had personally guaranteed. Under a restructuring agreement with several banks, Trump was forced to surrender his airline, which was taken over by US Airways in 1992; to sell the Trump Princess; to take out second or third mortgages on nearly all of his properties and to reduce his ownership stakes in them; and to commit himself to living on a personal budget of $450,000 a year. Despite those measures, the Trump Taj Mahal declared bankruptcy in 1991, and two other casinos owned by Trump, as well as his Plaza Hotel in New York City, went bankrupt in 1992. Following those setbacks, most major banks refused to do any further business with him. Estimates of Trump’s net worth during this period ranged from $1.7 billion to minus $900 million.Trump’s fortunes rebounded with the stronger economy of the later 1990s and with the decision of the Frankfurt-basedDeutsche Bank AG to establish a presence in the U.S. commercial real estate market. Deutsche Bank extended hundreds of millions of dollars in credit to Trump in the late 1990s and the 2000s for projects including Trump World Tower (2001) in New York andTrump International Hotel and Tower (2009) in Chicago. In the early 1990s Trump had floated a plan to his creditors to convert his Mar-a-Lago estate into a luxury housing development consisting of several smaller mansions, but local opposition led him instead to turn it into a private club, which was opened in 1995. In 1996 Trump partnered with the NBC television network to purchase the Miss Universe Organization, which produced the Miss Universe, Miss USA, and Miss Teen USA beauty pageants. Trump’s casino businesses continued to struggle, however: in 2004 his company Trump Hotels & Casino Resorts filed for bankruptcy after several of its properties accumulated unmanageable debt, and the same company, renamed Trump Entertainment Resorts, went bankrupt again in 2009.In addition to his real-estate ventures, in 2004 Trump premiered a reality television series in which he starred,The Apprentice, which featured teams of contestants competing in various business-related projects, with a single contestant ultimately winning a lucrative one-year contract as a Trump employee (“apprentice”). The Emmy-nominated show, in which Trump “fired” one or more contestants on a weekly basis, helped him to further enhance his reputation as a shrewd businessman and self-made billionaire. In 2008 the show was revamped asThe Celebrity Apprentice, with newsmakers and entertainers as contestants.Trump marketed his name as a brand in numerous other business ventures including Trump Financial, a mortgage company, and the Trump Entrepreneur Initiative (formerly Trump University), an online education company focusing on real-estate investment and entrepreneurialism. The latter firm, which ceased operating in 2011, was the target of class-action lawsuits by former students and a separate action by the attorney general of New York state, alleging fraud. After initially denying the allegations, Trump settled the lawsuits for $25 million in November 2016. In 2019, more than two years into his presidency, Trump agreed to pay $2 million in damages and to admit guilt to settle another lawsuit by the attorney general of New York that had accused him of illegally using assets from his charity, the Trump Foundation, to fund his 2016 presidential campaign. As part of the settlement, the Trump Foundation was dissolved.In 2018 The New York Times published a lengthy investigative report that documented how Fred Trump had regularly transferred vast sums of money, ultimately amounting to hundreds of millions of dollars, to his children by means of strategies that involved tax, securities, and real-estate fraud, as well as by legal means. According to the report, Donald was the main beneficiary of the transfers, having received the equivalent (in 2018 dollars) of $413 million by the early 2000s.Trump was credited as coauthor of a number of books on entrepreneurship and his business career, including Trump: The Art of the Deal (1987), Trump: The Art of the Comeback (1997), Why We Want You to Be Rich (2006), Trump 101: The Way to Success (2006), and Trump Never Give Up: How I Turned My Biggest Challenges into Success (2008)From the 1980s Trump periodically mused in public about running for president, but those moments were widely dismissed in the press as publicity stunts. In 1999 he switched his voter registration from Republican to theReform Party and established a presidential exploratory committee. Though he ultimately declined to run in 2000, he published a book that year,The America We Deserve, in which he set forth his socially liberal and economically conservative political views. Trump later rejoined the Republican Party, and he maintained a high public profile during the 2012 presidential election. Although he did not run for office at that time, he gained much attention for repeatedly and falsely claiming that Democratic Pres. Barack Obama was not a natural-born U.S. citizen.In June 2015 Trump announced that he would be a candidate in theU.S. presidential election of 2016. Pledging to “make America great again,” he promised to create millions of new jobs; to punish American companies that exported jobs overseas; to repeal Obama’s signature legislative achievement, the Affordable Care Act (ACA); to revive the U.S. coal industry; to drastically reduce the influence of lobbyists in Washington, D.C. (“drain the swamp”); to withdraw the United States from the 2015 Paris Agreement on climate change; to impose tariffs on countries that allegedly engaged in trade practices that were unfair to the United States; to construct a wall along the U.S.-Mexico border to preventillegal immigration from Latin America; and to ban immigration by Muslims. Trump mused about those and other issues inCrippled America: How to Make America Great Again (2015).On the campaign trail, Trump quickly established himself as a political outsider, a common strategy among nonincumbent candidates at all levels. In Trump’s case the stance proved popular with conservative voters—especially those in theTea Party movement—and he frequently topped opinion polls, besting established Republican politicians. However, his campaign was often mired in controversy, much of it of his own making. In speeches and especially via Twitter, a social medium he had used frequently since 2009, Trump regularly made inflammatory remarks, including racist and sexist slurs and insults. Other public comments by Trump, especially those directed at his rivals or detractors in the Republican establishment, were widely criticized for their belligerence, their bullying tone, and their indulgence in juvenile name-calling. Trump’s initial refusal to condemn the Ku Klux Klan after a former Klansman endorsed him also drew sharp criticism, as did his failure to repudiate racist elements among his supporters, including white supremacists, white nationalists, and neo-Nazis. While Trump’s comments worried the Republican establishment, his supporters were pleased by his combativeness and his apparent willingness to say whatever came into his mind, a sign of honesty and courage in their estimation.After a loss in the Iowa caucuses to open up the primary season in February 2016, Trump rebounded by winning the next three contests, and he extended his lead with a strong showing on Super Tuesday—when primaries and caucuses were held in 11 states—in early March. After a landslide victory in the Indiana primary in May, Trump became the presumptive Republican nominee as his last two opponents, Ted Cruz and John Kasich, dropped out of the race.In July 2016 Trump announced that Indiana Gov.Mike Pence would be his vice presidential running mate. At the Republican National Convention the following week, Trump was officially named the party’s nominee. There he and other speakers harshly criticized the presumptive Democratic nominee, former secretary of stateHillary Clinton, blaming her for the 2012 attack on the U.S. consulate in Benghazi, Libya, and for allegedly having mishandled classified State Department e-mails by using a private e-mail server. Earlier in July, the FBI announced that an investigation of Clinton’s use of e-mail as secretary of state had determined that her actions had been “extremely careless” but not criminal. (A 2019 report by the U.S. State Department, concluding a yearslong investigation, found “no persuasive evidence of systemic, deliberate mishandling of classified information” by Clinton.) Trump continued his criticisms of Clinton in the ensuing weeks, routinely referring to her as “Crooked Hillary” and repeatedly vowing to put her in jail if he were elected. Trump’s threat to jail his political opponent was unprecedented in modern U.S. political history and was not founded in any constitutional power that a U.S. president would have.Despite having pledged in 2015 that he would release his tax returns, as every presidential nominee of a major party had done since the 1970s, Trump later refused to do so, explaining that he was under routine audit by the Internal Revenue Service (IRS)—though there was no legal bar to releasing his returns under audit, as Pres. Richard Nixon had done in 1973. In January 2017, soon after Trump’s inauguration as president, a senior White House official announced that Trump had no intention of releasing his returns. Trump’s tax returns and other financial information later became a focus of investigations by the House of Representatives, the district attorney for Manhattan, and the attorney general of New York into alleged criminal activity by Trump and his associates (see below Russia investigation).In late July, on the eve of the Democratic National Convention, thousands of internal e-mails of the Democratic National Committee (DNC) were publicly released by the Web siteWikiLeaks in an apparent effort to damage the Clinton campaign. Reacting to widespread suspicion that the e-mails had been stolen by Russian hackers, Trump publicly encouraged the Russians to hack Clinton’s private e-mail server to find thousands of e-mails that he claimed had been illegally deleted. A later investigation by the office of Robert Mueller, the special counsel appointed in 2017 to investigate Russian interference in the 2016 presidential election (see below Russia investigation), determined that Russian hackers first attempted to break into the personal e-mail servers of Clinton campaign officials on the same day, only hours after Trump issued his invitation.Following the Democratic convention, Trump continued to make controversial and apparently impromptu comments via Twitter and in other forums that embarrassed the Republican establishment and seriously disrupted his campaign. In October 2016 a hot-mic video from 2005 surfaced in which he told an entertainment reporter in vulgar language that he had tried to seduce a married woman and that “when you’re a star…you can do anything,” including grabbing women by the genitals. Although Trump dismissed the conversation as “locker room talk,” eventually more than two dozen women claimed that they had been sexually harassed or assaulted by Trump in the past (some of the allegations were made after Trump became president). During the campaign Trump and his legal representatives generally denied the allegations and asserted that all the women were lying; they also noted that Bill Clinton had previously been accused of sexual harassment and assault. In part because of the video, Trump’s support among women voters—already low—continued to wane, and some Republicans began to withdraw their endorsements.Approximately one hour after the release of the Trump video, WikiLeaks published a trove of e-mails that later investigations determined had been stolen by Russian hackers from the account ofJohn Podesta, Clinton’s campaign manager. On the same day, the U.S. intelligence community publicly announced its assessment that the Russian government had directed efforts by hackers to steal and release sensitive Democratic Party e-mails and other information in order to bolster the Trump campaign and to weaken public confidence in U.S. democratic institutions, including the news media. In response, Trump attacked the competence and motives of U.S. intelligence agencies and insisted that no one really knew who might have been behind the hacking. A secret CIA report to Congress in December and a separate report ordered by Obama and released in January 2017 also concluded that the Russians had interfered in the election, including through the theft and publication of Democratic Party e-mails and through a vast public influence campaign that had used fake social media accounts to spread disinformation and create discord among Americans.Despite his ongoing efforts to portray Clinton as “crooked” and an “insider,” Trump trailed her in almost all polls. As election day neared, he repeatedly claimed that the election was “rigged” and that the press was treating him unfairly by reporting “fake news,” a term he used frequently to disparage news reports containing negative information about him. He received no endorsements from major newspapers. During the third and final presidential debate, in October, he made headlines when he refused to say that he would accept the election results.Eight days after that debate, the Trump campaign received a boost when FBI directorJames Comey notified Congress that the bureau was reviewing a trove of e-mails from an unrelated case that appeared to be relevant to its earlier investigation of Clinton. Trump seized on the announcement as vindication of his charge that Clinton was crooked. Six days later Comey announced that the new e-mails contained no evidence of criminal activity. Notwithstanding the damage that Comey’s revelation had done to her campaign, Clinton retained a slim lead over Trump in polls of battleground states on the eve of election day, and most pundits and political analysts remained confident that she would win. When voting proceeded on November 8, 2016, however, Trump bested Clinton in a chain of critical Rust Belt states, and he was elected president. Although Trump won the electoral college vote by 304 to 227, and thereby the presidency, he lost the nationwide popular vote by more than 2.8 million. (After the election, Trump repeatedly claimed, without evidence, that three to five million people had voted for Clinton illegally.) Trump took the oath of office on January 20, 2017.Trump’s unexpected victory prompted much discussion in the press regarding the reliability of polls and the strategic mistakes of the Clinton campaign. Most analysts agreed that Clinton had taken for granted some of her core constituencies (such as women and minorities) and that Trump had effectively capitalized upon the economic anxieties and racial prejudices of some working-class whites, particularly men.PresidencyAlmost immediately upon taking office, Trump began issuing a series of executive orders designed to fulfill some of his campaign promises and to project an image of swift, decisive action. His first order, signed on his first day as president, directed that all “unwarranted economic and regulatory burdens” imposed by the ACA should be minimized pending the “prompt repeal” of that law. Five days later he directed the secretary of the Department of Homeland Security to begin planning for the construction of a wall along the country’s southern border. An executive order on ethics imposed a five-year ban on “lobbying activities” by former executive branch employees but weakened or removed some lobbying restrictions imposed by the Obama administration.Pres. Barack Obama (right) and President-elect Donald Trump in the Oval Office of the White House, Washington, D.C., November 10, 2016.