Section 199A QBI Deduction-Insurance Broker Trainer

[sami]

I just got a client who started a new business as sole proprietor of training others of becoming better wealth advisors/insurance brokers to sell annuities etc. I was wondering if my client will qualify for 199A deduction as non-SSTB? I don't think he will be considered consultant? As he specifically mentioned that he does three day training sessions with them and his clients are already insurance brokers and are already in the industry. He just provides them training tools and show them live seminar presentations and marketing tools to become better advisors. On the side my tax client also owns wealth advisory business as S-corp in the same building but in different office space. But he uses same staff or assistance, if needed. Different books and records are kept on all businesses but have shared staff. He has not shown any employee on this new business yet as business just started a month ago with no income but only overhead expenses of opening a new office. Any thoughts or suggestions will be helpful. I am confused with section 199A as far as what trade or business?

[kathyc2]

Since you mentioned annuities, my first question would be if he receives a kickback from the annuity company if the people who take his class sell them to clients.

[sami]

The annuities that he gets commissions are from his wealth advisory entity which is an S-Corp that he sells to clients. From this new sole proprietorship we just gets paid from the attends who register for his class and he gets no commissions from the sales. He gets flat fee as instructor/trainer as registration fee.

[ATSMAN]

Looks like there are two separate business entities (sole prop and S-corp) with some shared employees. If the sole prop business is showing a loss, you don't have to worry about QBI on that.

[kathyc2]

I would say no deduction based on "any trade or business where the principal asset of that trade or business is the reputation or skill of one or more of its employees"

[New York Enrolled Agent]

I would say no deduction based on "any trade or business where the principal asset of that trade or business is the reputation or skill of one or more of its employees"

Kathy - the final regulations put a significant reduction on what this constitutes. Reg §1.199A-5 limits the meaning of the "reputation or skill" clause to only 3 cases. You basically have to be a celebrity.

1. Income from endorsement of products or services
2. Income for licensing or using individual's name, likeness, etc.
3. Appearance fees or income to reality performers, etc.