s. 199A and Separate Returns

[Corduroy Frog]

Andy and Becky have been filing joint returns for years.  They both have Sch C business.  Becky's business has had losses, and she has accumulated losses for purposes of taking the s. 199A deduction.  Andy's business has been profitable, and he has no such accumulated losses.

If they file separate returns, will Andy's s.199A deduction be free of Becky's accumulated losses?

 

[jklcpa]

Was there any net unused QBI loss on the 2023 joint return that is carrying forward to 2024?

[Corduroy Frog]

Yes, but it was a "net" because of her loss, and it was a joint return for 2023.  Does not appear Drake tracks the QBI loss separately going forward to 2024, although there were in fact separate Sch C's.

[Lee B]

Here is more than you will ever want to know:

https://www.thetaxadviser.com/issues/2022/dec/taxpayer-marital-status-and-the-qbi-deduction.html

[Corduroy Frog]

Thank you - and you are correct.

[jklcpa]

2 hours ago, Corduroy Frog said:

Yes, but it was a "net" because of her loss, and it was a joint return for 2023.  Does not appear Drake tracks the QBI loss separately going forward to 2024, although there were in fact separate Sch C's.

It isn't tracked separately by business because the regs say that the QBI loss carryforward is treated as if it is a separate business.
reg sec 1.199A-1(c)(2)for computation when income doesn't exceed threshold and 1.199A-1(d)(2)(iii)(B) when income does exceed threshold.  Regarding the loss carryfwd, both sections say the same thing:

Quote

1.199A-1(c)(2) Carryover rules—(i) Negative total QBI amount. If the total QBI amount is less than zero, the portion of the individual's section 199A deduction related to QBI is zero for the taxable year. The negative total QBI amount is treated as negative QBI from a separate trade or business in the succeeding taxable years of the individual for purposes of section 199A and this section. This carryover rule does not affect the deductibility of the loss for purposes of other provisions of the Code.