Alice is a world famous chef who operates Chez Panache (“Chez"), a restaurant structured as an Scorporation

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Alice is a world famous chef who operates Chez Panache (“Chez"), a restaurant structured as an Scorporation. She is the sole shareholder. In the current year, Chez generates $2.5 million of gross receipts and incurs $1 million of deductible operating expenses. In addition, the corporation pays Alice a salary of $200,000 and $400,000 in wages to other employees. Chez's net income is thus $900,000, all of which passes through to Alice, who has no income from other sources. Assume that the corporation does not own any "qualified property" within the meaning of $ 199A(b)(6).

(a) Consider whether Alice is entitled to a $ 199A deduction with respect to her income from Chez's business.

(b) Same as (a), above, except Chez does not pay Alice any salary, so that her share of net profits from the business is $1.1 million.