The deduction of up to 20% of qualified business income (QBI) takes into account deductions and losses that have previously been disallowed, suspended, limited, or carried over (when the QBI deduction went into effect) due to various limitations. The IRS has now clarified the treatment of some of these losses (T.D. 9899). Essentially, such losses (e.g., disallowed passive activity losses) are taken into account on a first-in, first-out (FIFO) basis. The new rule makes it clear that the list of loss disallowance or suspension provisions isn’t exhaustive.
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